Claiming Child Care

Lacklustre · Post by **Lacklustre** » Tue Mar 04, 2014 11:54 am

We have a fairly complex tax situation. I am a US Citizen married to a Canadian Citizen. However, I do not have any legal standing in Canada yet as we are in the process of securing my spousal visa. We applied outland so I am still a US resident for tax and legal purposes. I do spend a large amount of time in Canada as we have a 2yr old son together. We got married in 2012 and were told then by her accountant that she couldn't claim the childcare costs we incurred in 2012 because I had the lower income but we were both filing married but seperate in our own countries. My income was not included in her Canadian filing and vice versa with my US filing.

We would like to be able to claim these expenses for 2013 as they are significant but not sure what is the best approach. Should/could we file both incomes in both countries and get the credit that way, or can I claim our son on my US taxes and get credit for the childcare there despite the fact that he doesn't legally live with me or even in the US?

We're not sure what route to take in terms of where we file and the marital status we use?

Any advice would be greatly appreciated

nelsona · Post by **nelsona** » Tue Mar 04, 2014 12:23 pm

First off, your US income does have to be included on Page 1 of your spouse's return. That is because, certain benefits in canada are determined by the couple's income. You don't (yet) have to file a rertun in Canda, but your income is to be reported.

You are allowed to clim your son on your US tax, and even get the child tax credit. He is a US citizen and should already have a SSN, or one can easily be obtained for him.

But, since the child does not live in your US home, you can't claim the expense, if yopu continue to file as married filing separately.

Generally, I advise married couples to file jointly in US, even if one or both live in Canada, it may make even more sense in this situation. This would proabably lower your taxes a bit.

But for Canada, (which is where the real tax hit comes) I don't see any way that you could file for this, not do I see any reason to try until you actaully move to Canada.

Lacklustre · Post by **Lacklustre** » Tue Mar 04, 2014 2:37 pm

Thank you Nelsona

I don't believe we did include my income on her return for 2012 even though we were married for part of the year, is that something to worry about or shoud she amend her return?

My son's birth hasn't been registered in the as we don't see any advantage to him having US citizenship at this stage in his life, he can make that choice himself if he wants to later so that might hamper our chances.

Presumably she would need an ITIN if we file jointly, which I understand is relatively painless to get, but is there a threshold where her income would nullify any tax benefits we would get from it. FOr instance, does an income of $100k mean we would probably have a higher tax burden than the married deduction would give, or is the tax code so complex there is no simple answer? Do you have to declare net income or all income and expenses. She has her own business which would make for a very complicated US tax return with all the GST deductions etc

Thanks again

nelsona · Post by **nelsona** » Tue Mar 04, 2014 2:44 pm

She should amend her return if she is getting any GST rebate, CCTB or UCTC or somesuch.

nelsona · Post by **nelsona** » Tue Mar 04, 2014 2:50 pm

Your son's citizenship isn't really a choice anymore. He is a citizen. No need to register. That was the old rules.

Besides it worth $1000 a yar to you, even if you live in canada!

Your spouse will never pay tax in US on any Cdn income. The higher her income, the higher her Cdn taxes, which will take care of any US tax. And your tax will be lower.

Try it out and see, using either the FEIE (form 2555) or the 1116 foreign tax credit. Unless your income is only slightly less than hers, then I would think you would get a better rate on your income and get the $1000 child tax credit and the child care expenses.