Sourcing and tax on IRA distributions

Canadian Newbie · Post by **Canadian Newbie** » Thu Mar 12, 2015 6:16 pm

US citizen living in Canada as a PR.

I hope this is an easy question......

I will be withdrawing appox. 50K from my US IRA this year and I am trying to project the tax.

The distributions if I am correct are treated as follows-

Fully reported on both US 1040 and Cdn T1.
Cdn tax is reduced via the FTC on the T1. No FTC on the US return is taken and normal rates of tax apply.....no treaty tax rate of %15 is used. US gets the tax.

Thanks for any help. You guys are great.

nelsona · Post by **nelsona** » Fri Mar 13, 2015 12:06 am

The tax you will owe in US will be MUCH less than 15%, since it will be prorated with all your other income on 1040.

With that prorated amount, you can apply this on your Cdn return.

If it were more than 15%, you would only clim 15% on your T! ftc, and have to re-source enough of it on a 1116 form to reduce the US tax to 15%.