Childcare and adoption expenses

[samstone]

I have a unique situation that I can’t find much about on the web or this forum.

I’m a US resident and citizen that files a joint return in the US. I commute to work on a daily basis to Canada. I have two new issues that I have not dealt with in years previous.

1) I paid daycare in Canada for my child
2) We adopted a child (domestic) in the US that finalized in 2017

1) I confirmed that I’m eligible to deduct the childcare on the Canadian side because the services were provided in Canada and paid to a Canadian resident. In order to deduct these, I also need to meet the other normal criteria such as me being the lower income earner, which I am.

I’m trying to determine if these can also be deducted on the US side. I read publication 513 and the instructions for the form and it says “If you are living abroad, your care provider may not have, and may not be required to get, a U.S. taxpayer identification number. If so, enter "LAFCP" (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number.â€￾ I’m not living abroad, but if the IRS permits this for those individuals, I’m making the assumption that I’m ok to deduct them on the US side. Can anyone confirm this?

2) Can I claim the adoption expenses paid in the US on the Canadian side? I found the following: A non-resident is NOT eligible to claim the adoption expenses tax credit UNLESS all or substantially all (more than 90%) of his or her net world income is reported on a T1 return. However, it said nothing about the expenses being paid in another country. Does this just apply if I paid them in Canada? 100% of my income was earned in Canada, so if the expenses did not have to be paid in Canada, I meet the 90% test and should be able to deduct them.

I did a test run of my returns and this will save me about $2K on the Canadian side and will not reduce my foreign tax credits on the US side at all. I think this is because I have carryforward credits from previous years. So this will be a huge savings if I can claim them in Canada.

Any help would be much appreciated

[nelsona]

I would claim them on both.

The proviso that you report 90% of your would income while being a non-resisnt of Canada is the indication that you are really working an earning your money in Canada, and are thus eligible for all the normal deductions available on the T2. The guide for non-residents makes this clearer when describing what you can deduct.

[samstone]

Ok great, thanks so much.

I was leaning towards claiming it, but wasn't quite sure I could.

I suppose worst case, CRA denies it and no harm done.

Sam