Back to Canada - Moving expenses deduction

jeffwa · Post by **jeffwa** » Fri Jun 29, 2007 5:22 pm

Hi,

Moving back to Canada in mid-september. I'll have to pay hefty moving expenses myself...

Is it possible to deduct this when filling my last 1040 (fiscal year 2007)?

Thx,

jeff

nelsona · Post by **nelsona** » Sat Jun 30, 2007 6:38 am

Moving expenses are deductible on 1040 when leaving US, but only against wage income earned after the move. Even if you did work after leaving US, you're already going to use the foreign earned income exclusion, so you would want to check if you can do both. You can carry it forward to the 2007 tax year, in which you may still be filing a 1040.

nelsona · Post by **nelsona** » Mon Jul 02, 2007 12:23 pm

Just to confirm, you cannot claim both moving expenses and foreign earned income exclusion on the same wages, so your moving expenses won't do you much good, as you won't be paying any US tax on the cdn wages anyways.

nelsona · Post by **nelsona** » Mon Jul 02, 2007 1:32 pm

... and no, your moving expenses back to Canada re not deductible on your Cdn return either.

bruce · Post by **bruce** » Thu Aug 02, 2007 11:26 pm

Is there not a scenario where it might make sense to use the 1116 FTCs instead of the FEIE? (In particular I'm thinking of my situation as a USC.) In this case, the moving expenses would be useful on the 1040, wouldn't they?

nelsona · Post by **nelsona** » Fri Aug 03, 2007 5:01 am

Putting asidewhich method is better, why would moving expense, which can only write off a portion of your cdn wages, be better than FEIE which will write it all off.

FTC is now the only way to go. But still, You won't have any US tax to pay on Cdn wages, so moving expenses will not be used any ways.

bruce · Post by **bruce** » Fri Aug 03, 2007 9:51 am

So what you're saying is that (even as a USC), it will always make sense to use FEIE (instead of FTC) for earned income after moving to Canada. Therefore, any deductions (including mortgage interest, moving expenses, etc) are only relevant if they occured prior to becoming a Canadian resident(and could be written off against US-sourced earned income). After moving to Canada, these types of US deductions are useless.

I also think I hear you saying that FTCs will always be be necessary for passive income (and presumably earned income over the FEIE threshold).

Did I get that all correct? Thanks.

nelsona · Post by **nelsona** » Fri Aug 03, 2007 12:59 pm

The moving expense is useless regardless of using FTC or FEIE.

All those other US-only tax deductions will be *almost* usless whether you use FEIE or FTC, unless you can match this up with a Cdn-only deduction (like RRSP).

Your US tax rate on foreign wages will be 0 (using FEIE) and '0' using FTC, in any event. The US tax on all other income will be miniscule using FEIE and '0' using FTC.

FEIE only applies to Cdn wages. Any other income would require use of FTC.

In fact, if you have kids, you almost always should use FTC exclusively, to get child tax credit.