Canadian Taxes


H

Hank Youngerman

I've posted on this general subject before.

Assume I am am American citizen married to a Canadian citizen who
lives and works in Canada but chooses to be treated as a US Resident.
My understanding is that we can file married joint, and we would get a
credit against our US taxes for the amount she pays to Canada, subject
to certain limits.

Here are my questions:

1) Can we take the same deductions in computing taxable income for her
expenses as for mine. For example, can her provincial income tax be
deducted, as my state income taxes can? Same for deductions to her
retirement plan (the Retirement Savings Plan in Canada is similar to
US IRA's)?

2) I know the tax credit is limited, in some form it is something
like:

Joint taxes * Her Income/Total Income

In this formula, is "her income" and "total income" the total income
from all sources or taxable income? Would my income be after payments
into my 401(k)?

3) Assuming we own a home together in Canada, can we take deductions
for mortgage interest and property taxes on our joint return? I
assume we can, since this would either be her "primary" home or at
least my "secondary" home.

Thanks in advance.
 
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J

John Levine

1) Can we take the same deductions in computing taxable income for her
expenses as for mine. For example, can her provincial income tax be
deducted, as my state income taxes can?
When I've paid Canadian taxes, my preparer has treated both the
federal and provincial taxes (which were substantial, it was Quebec)
as foreign taxes and credited them subject to the usual limits on form
1116.

Same for deductions to her retirement plan (the Retirement Savings
Plan in Canada is similar to US IRA's)?
I am pretty sure that the laws making IRA contributions deductible is
specific to IRAs, not foreign things sort of like IRAs. If she paid
Canadian taxes, she could presumably deduct her RSP contributions
there.

3) Assuming we own a home together in Canada, can we take deductions
for mortgage interest and property taxes on our joint return?
Apparently you can:

http://www.askmehelpdesk.com/taxes/home-mortgage-interest-deduction-foreign-property-us-tax-return-415054.html

R's,
John
 
S

Sharx35

Hank Youngerman said:
I've posted on this general subject before.

Assume I am am American citizen married to a Canadian citizen who
lives and works in Canada but chooses to be treated as a US Resident.
My understanding is that we can file married joint, and we would get a
credit against our US taxes for the amount she pays to Canada, subject
to certain limits.

Here are my questions:

1) Can we take the same deductions in computing taxable income for her
expenses as for mine. For example, can her provincial income tax be
deducted, as my state income taxes can? Same for deductions to her
retirement plan (the Retirement Savings Plan in Canada is similar to
US IRA's)?

2) I know the tax credit is limited, in some form it is something
like:

Joint taxes * Her Income/Total Income

In this formula, is "her income" and "total income" the total income
from all sources or taxable income? Would my income be after payments
into my 401(k)?

3) Assuming we own a home together in Canada, can we take deductions
for mortgage interest and property taxes on our joint return? I
assume we can, since this would either be her "primary" home or at
least my "secondary" home.

Thanks in advance.
You would be strongly advised to consult with a PROFESSIONAL accountant,
skilled in both Canadian AND U.S. tax law.
 
P

parrisbraeside

I've posted on this general subject before.

Assume I am am American citizen married to a Canadian citizen who
lives and works in Canada but chooses to be treated as a US Resident.
My understanding is that we can file married joint, and we would get a
credit against our US taxes for the amount she pays to Canada, subject
to certain limits.

Here are my questions:

1) Can we take the same deductions in computing taxable income for her
expenses as for mine.  For example, can her provincial income tax be
deducted, as my state income taxes can?  Same for deductions to her
retirement plan (the Retirement Savings Plan in Canada is similar to
US IRA's)?

2) I know the tax credit is limited, in some form it is something
like:

Joint taxes * Her Income/Total Income

In this formula, is "her income" and "total income" the total income
from all sources or taxable income?  Would my income be after payments
into my 401(k)?

3) Assuming we own a home together in Canada, can we take deductions
for mortgage interest and property taxes on our joint return?  I
assume we can, since this would either be her "primary" home or at
least my "secondary" home.

Thanks in advance.
1) Not if you are intending to take a credit for those same taxes. You
get to take the exemption, the credit or the deduction.

2) Work through the 1116 form, if you are planning to take the credit
and not the deduction.

3) I am not bothering to answer this question.
 
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A

Alan

I've posted on this general subject before.

Assume I am am American citizen married to a Canadian citizen who
lives and works in Canada but chooses to be treated as a US Resident.
My understanding is that we can file married joint, and we would get a
credit against our US taxes for the amount she pays to Canada, subject
to certain limits.

Here are my questions:

1) Can we take the same deductions in computing taxable income for her
expenses as for mine. For example, can her provincial income tax be
deducted, as my state income taxes can? Same for deductions to her
retirement plan (the Retirement Savings Plan in Canada is similar to
US IRA's)?
When you both elect to treat your spouse as a US resident, you both
become eligible for all the tax benefits available to US residents and
US citizens on a joint return. This means that you can itemize your
deductions and deduct foreign income taxes paid (provincial income taxes
are foreign income taxes). In lieu of deducting foreign income taxes,
you can compute a foreign tax credit using IRS Form 1116. As it appears
that she is a bona fide resident of Canada and has earned income (you
said she was working), you may want to look at taking the foreign earned
income exclusion. See IRS Pub 54 for more information on this. Keep in
mind that you can not double dip (triple dip?) on how you treat foreign
income taxes paid and excluded income on which you paid foreign income
taxes.
2) I know the tax credit is limited, in some form it is something
like:

Joint taxes * Her Income/Total Income

In this formula, is "her income" and "total income" the total income
from all sources or taxable income? Would my income be after payments
into my 401(k)?
Work Form 1116. This forum does not lend itself to a simple explanation
on how the credit is computed. It is not simple.
3) Assuming we own a home together in Canada, can we take deductions
for mortgage interest and property taxes on our joint return? I
assume we can, since this would either be her "primary" home or at
least my "secondary" home.
You can always deduct all real property taxes you paid. It doesn't
matter that some of your property is in Canada. You can deduct qualified
mortgage interest you paid on two homes (main home and second home).
There are limits on the amount of interest you can deduct unless you
meet the grandfathered rule. See IRS Pub 936 for more details on
deducting mortgage interest.
 

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