Family Tax Credit on 1040NR?

nirvana_1959 · Post by **nirvana_1959** » Fri Mar 09, 2018 3:37 pm

If I don't make many trips to Canada (say a total of 10 weekend trips) and my stay in Canada is < 100 days can I then shield all my US income by taking deductions on Line 256 (invoking Article IV ) of the T1 return ? If that's possible then I can bring the US taxes down (by making 401 K / HSA contributions) .

nelsona · Post by **nelsona** » Fri Mar 09, 2018 4:28 pm

I'm not sure how you get MFJ to be lower than XXV(2), since XXV(2) is the MFJ taxrate but on US income ONLY.

If say 90% of your income is in US, and you got $6000 of tax on your 1040 MFJ, then you should get roughly $5400 of US tax using XXV(2), since you are reporting less income.

Are you sure you are doing this right?

nelsona · Post by **nelsona** » Fri Mar 09, 2018 4:34 pm

If you invoke the treaty on Residence, then you are immediately deemed non-resident of Canada and would have to file as such (departing resident the first year, non-resident thereafter). CRA no longer allows one to claim that their income is exempt because they are not residents, but continue filing as resident.

256 is for specific types of income that are covered in a treaty (like 15% of Social security). US wages are not such income.

nirvana_1959 · Post by **nirvana_1959** » Fri Mar 09, 2018 4:58 pm

Taxable income on 1040NR is higher than 1040 MFJ and hence the taxes:

MFJ
US Income $70,000
CA Income $10,000
Std deduction ($24,000)
[b]Taxable Income $56,000
Tax $6,339
Tax rate (Tax / Taxable income) 11.32%[/b]

XXV 1040NR
US Income $70,000
Itemized deduction (State tax withheld) ($4,000)
[b]Taxable Income $66,000
Tax using 1040 Proforma Rate (11.32%) $7,471 [/b]
[/img]

nirvana_1959 · Post by **nirvana_1959** » Fri Mar 09, 2018 5:23 pm

Ignore my last post. Look at this image instead:

[img]https://imagebin.ca/v/3uK2RcwaUJmV[/img]

nirvana_1959 · Post by **nirvana_1959** » Fri Mar 09, 2018 5:24 pm

[url]https://imagebin.ca/v/3uK2RcwaUJmV[/url]

nelsona · Post by **nelsona** » Sat Mar 10, 2018 6:28 pm

Yes, I see what you mean, the treaty 1040NR is higher than MFJ (in the new case of 24K standard deduction) but, this will still be less than 1040NR without invoking treaty.

SO, as I said, many more may find it better to invoke treaty, not that exemptions are gone.

nirvana_1959 · Post by **nirvana_1959** » Sat Mar 10, 2018 8:44 pm

Thanks Nelson. May be they will compensate 1040NR by giving additional itemised deductions or some standard deduction (for taking out the exemptions). Keeping my fingers crossed.

nelsona · Post by **nelsona** » Sun Mar 11, 2018 7:44 am

I doubt it. I'm pretty sure that was one of the benefits Trump was looking at, given his antipathy to foreigners and immigrants other than his current spouse.