Foreign Tax Credits

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CanadaTOUs
Posts: 2
Joined: Wed Sep 11, 2019 2:12 pm

Foreign Tax Credits

Post by CanadaTOUs » Wed Sep 11, 2019 2:18 pm

Hi Everyone,

I have a question regarding Foreign Tax Credits and how to fill out forms T2209 and T2036. Note I am a Canadian Citizen working in the US but living in Canada.

I always have an accountant file my taxes, but recently I was notified that this form may be filled out incorrectly by a colleague.

What is the proper formula for Line 431 on the T2209? Is it:
Method 1) Line 431 = (Federal Taxes Owed for the year) + (State Taxes Owed for the year)
OR
Method 2) Line 431 = (Federal Taxes Owed for the year) + (State Taxes Owed for the year) + (Social Security Paid) + (Medicare Paid)

My accountant used method 1 and applied Social Security as RRSP contributions and left out Medicare entirely. This would reduce taxable income instead of being converted to tax credits (thus raising what I would owe in Canada vs method 2).

Thanks in advance for the help.

nelsona
Posts: 15980
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Foreign Tax Credits

Post by nelsona » Thu Sep 12, 2019 7:57 am

Your accountant was incorrect. FICA taxes (both SS and Medicare) are foreign taxes eligible for foreign tax credit, and have nothing to do with pension, RRSP, etc.

A tax credit would always be better than a deduction in any event.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

CanadaTOUs
Posts: 2
Joined: Wed Sep 11, 2019 2:12 pm

Re: Foreign Tax Credits

Post by CanadaTOUs » Thu Sep 12, 2019 9:31 am

Thanks nelsona, greatly appreciated.

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