US resident earning Canadian source employment income. Work performed in both Canada and the US. I am counting work days in each location and excluding the US portion as allocated on a per diem basis on line 25600. What about the deductions (RRSP, Pension, Union) I think these are permitted.
Is the line 256 amount calculated using the % allocation * total income or net income? Must I also make an allocation for deductions?
Calculating the amount on like 25600
Moderator: Mark T Serbinski CA CPA
Re: Calculating the amount on like 25600
The Cdn deductions are ALL eligible to be included on your Cdn return, regardless of where the income is earned. Same for your RRSP deductions. It is the gross wages (the % of total wages) earned in US that is excludable on 256.
The non-excluded portion (the wages earned while in canada) are then used on your 1116 foreign tax credit calculation. The RRSP (if done through work) and pension contributions reduce your gross wages for the year on your US return. EI/CPP and your calcualted fed/prov taxes are used on 1116.
The non-excluded portion (the wages earned while in canada) are then used on your 1116 foreign tax credit calculation. The RRSP (if done through work) and pension contributions reduce your gross wages for the year on your US return. EI/CPP and your calcualted fed/prov taxes are used on 1116.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Bubba Gums
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Re: Calculating the amount on like 25600
Thanks Nelsona,
How does this play out on Schedule A/B for determining which credits one is eligible for. It would seem that one would still get full credits if >90% as this comes from line 23600. Is that correct? Perhaps the excluded income deducted on 25600 is written on "Income from sources outside Canada," and thus limiting credits?
How does this play out on Schedule A/B for determining which credits one is eligible for. It would seem that one would still get full credits if >90% as this comes from line 23600. Is that correct? Perhaps the excluded income deducted on 25600 is written on "Income from sources outside Canada," and thus limiting credits?
Re: Calculating the amount on like 25600
Report as indicated on schedule A, which means including your wages from Cdn-source (it is all from Cdn-source after all).
CRA will adjust if they want to say the treaty-exempt income reported on 256 doesn't count.
CRA will adjust if they want to say the treaty-exempt income reported on 256 doesn't count.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
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Bubba Gums
- Posts: 55
- Joined: Tue Jul 15, 2014 7:20 am
Re: Calculating the amount on like 25600
Nelsona,
CRA objected to including the income on Line 25600. Rather they want to put it on 23200. This makes no sense to me.
Their guide says, "Claim on line 25600 of your return the amount of your foreign income that you included in your income that is non-taxable in Canada because of a tax treaty with a foreign country. Specify the deduction you are claiming in the space provided at line 25600 of your return." as treaty exemptions should be put on 25600."
https://www.canada.ca/en/revenue-agency ... tions.html
Any opinion on that?
As a second part, they want to disallow non-refundable tax credits because of section 118.94 of the income tax act.
"118.94 Sections 118 to 118.07 and 118.2, subsections 118.3(2) and (3) and sections 118.8 and 118.9 do not apply for the purpose of computing the tax payable under this Part for a taxation year by an individual who at no time in the year is resident in Canada unless all or substantially all the individual’s income for the year is included in computing the individual’s taxable income earned in Canada for the year."
How is the determination for "all or substantially all" made? Schedule A and B?
Thank you for sharing your perspective.
CRA objected to including the income on Line 25600. Rather they want to put it on 23200. This makes no sense to me.
Their guide says, "Claim on line 25600 of your return the amount of your foreign income that you included in your income that is non-taxable in Canada because of a tax treaty with a foreign country. Specify the deduction you are claiming in the space provided at line 25600 of your return." as treaty exemptions should be put on 25600."
https://www.canada.ca/en/revenue-agency ... tions.html
Any opinion on that?
As a second part, they want to disallow non-refundable tax credits because of section 118.94 of the income tax act.
"118.94 Sections 118 to 118.07 and 118.2, subsections 118.3(2) and (3) and sections 118.8 and 118.9 do not apply for the purpose of computing the tax payable under this Part for a taxation year by an individual who at no time in the year is resident in Canada unless all or substantially all the individual’s income for the year is included in computing the individual’s taxable income earned in Canada for the year."
How is the determination for "all or substantially all" made? Schedule A and B?
Thank you for sharing your perspective.
Re: Calculating the amount on like 25600
For allowable deductions BOTH Sched A & B are used. if you don't exceed 90% of your world income being reported on your return, your deductions are severely limited.
Why they are saying you report the excluded income on line 23200 doesn't make sense to me either (none of the options for that line address your situation, 25600 does) , HOWEVER, by making you do this, your schedule A&B now fail the 90% test, since your income reduction occurs before line 23600 with is used. This may be their intent in having you reporting the reduction on the "earlier" line.
Have you considered simply reporting it all as Cdn income, and taking a larger foreign tax credit on your US return?
Why they are saying you report the excluded income on line 23200 doesn't make sense to me either (none of the options for that line address your situation, 25600 does) , HOWEVER, by making you do this, your schedule A&B now fail the 90% test, since your income reduction occurs before line 23600 with is used. This may be their intent in having you reporting the reduction on the "earlier" line.
Have you considered simply reporting it all as Cdn income, and taking a larger foreign tax credit on your US return?
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Re: Calculating the amount on like 25600
So, for Line 25600, they calculate it based on how many days you worked in Canada versus total work days, using your total income. You can deduct stuff like RRSP, pension, and union dues from your Canadian earnings, but you gotta divvy them up between what you earned in Canada versus the US.
Re: Calculating the amount on like 25600
I've been in a similar situation before. For line 25600, you calculate the amount based on the percentage of your total Canadian income, not just the net income. As for deductions like RRSP and union dues, you can definitely include those for the Canadian portion of your income. That’s what I did, and it worked out fine.