Form 2555 foreign earned income

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
XR7777
Posts: 14
Joined: Sat Oct 13, 2018 6:39 pm

Form 2555 foreign earned income

Post by XR7777 » Sat Mar 23, 2019 6:25 pm

Hello,
Should the foreign earned income report on line 19 the net income (after deduction of tax already paid, RRSP contribution, EI premiums, union due, Cpp contribution etc) of Canadian source?

Can anyone please explain the housing exclusion?

Thanks!

nelsona
Posts: 16012
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Form 2555 foreign earned income

Post by nelsona » Sun Mar 24, 2019 9:01 am

No, it is the gross wages minus expenses connected to that income, which are rare. Taxes RRSP etc are not expenses. EI and CPP are taxes (but you can't use them as tax credits since you are excluding the income).
It is almost always your gross wages.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

XR7777
Posts: 14
Joined: Sat Oct 13, 2018 6:39 pm

Re: Form 2555 foreign earned income

Post by XR7777 » Sun Mar 24, 2019 3:43 pm

Thank you nelsona!

I have difficulty with the qualifying period. I worked 15 days before I went down to the US. What is the number should I put on line 31? If 15, then only 15/365=4% of the $ 103,900 (maximum foreign earned income exclusion), which is $4156.
If I received a lot more income than $4156 which was already taxed. Does it mean I will be double taxed on this income?

Thanks!!

nelsona
Posts: 16012
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Form 2555 foreign earned income

Post by nelsona » Mon Mar 25, 2019 10:14 am

I'm not quite sure what you mean by the 15 days. You probably need to give a little more context.
There a re 2 different things that you need to do for 2555.

One is to determine if you can use 2555 at all. I f you live in xcanada for more than an entire tax year, you qualify, no need to go further. I assume you lived in Canada before moving to US.

The other, is to determine the maximum foreign income you can claim. this is based on when you became a US resident.

If you moved July 1, your maximum is 1/2 of the yearly maximum, if you moved on October 1, your maximum is 3/4 of the yearly maximum.

So the 15 days has nothing to do with it, and even if it did, you weren't using the calculation correctly. Are you not using software to do this? You should.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

XR7777
Posts: 14
Joined: Sat Oct 13, 2018 6:39 pm

Re: Form 2555 foreign earned income

Post by XR7777 » Mon Mar 25, 2019 11:06 pm

I lived in Canada for 15 years before I moved to the US so I qualify as a bona fide resident.

However, in 2018 I only lived in Canada for 15 days. I moved to the US on January 15. If my understanding is correct, the amount of foreign income can be excluded is determined by the proportion of uninterrupted time in Canada times the maximum ($103,900). That is (15/365) * 103900=4269. That means only 4269 can be excluded. If one made more than 4269, the rest of the income will be taxed. Am I right?

In this case, would it be better to use the foreign tax credit (form 1116) rather than foreign income exclusion (form 2225)?

nelsona
Posts: 16012
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Form 2555 foreign earned income

Post by nelsona » Wed Mar 27, 2019 5:39 am

Corect, only 15.365ths of your Cdn WAGES (not other income) can be excluded. So, you should use form 1116 instead.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

XR7777
Posts: 14
Joined: Sat Oct 13, 2018 6:39 pm

Re: Form 2555 foreign earned income

Post by XR7777 » Wed Mar 27, 2019 8:11 pm

okay. thank you again!

Post Reply