Do I file US or Canadian taxes first to claim tax credit??

[TorontoDan]

I just finished a temporary work permit at the university of Toronto and moved back to the US in August 2018. I am aware that I can claim a tax credit to avoid getting taxed twice, but I'm unclear on the logistics. Both the US and Canadian tax returns ask me to state how much I paid in taxes in the other country in order to establish how much I need to pay. Which should I file first?

It seems like I need to file one, I guess Canadian taxes since I spent more of the year there, but then I will pay taxes on the whole year and end up paying basically no federal taxes in the US, despite the fact that 4 months of my income was earned in the US.

Am I really supposed to just file one first, and it doesn't matter that I didn't earn all my income in that country?

And does anyone have any pointers on whether I should be looking into the foreign earned income exemption rather than the foreign tax credit?

Thanks so much for any guidance!

 

[canuck78]

There are accountants that specialize in these exact cases. Sure there maybe websites as well. This forum is not really the right place.

 

[canuck_in_uk]

I just finished a temporary work permit at the university of Toronto and moved back to the US in August 2018. I am aware that I can claim a tax credit to avoid getting taxed twice, but I'm unclear on the logistics. Both the US and Canadian tax returns ask me to state how much I paid in taxes in the other country in order to establish how much I need to pay. Which should I file first?

It seems like I need to file one, I guess Canadian taxes since I spent more of the year there, but then I will pay taxes on the whole year and end up paying basically no federal taxes in the US, despite the fact that 4 months of my income was earned in the US.

Am I really supposed to just file one first, and it doesn't matter that I didn't earn all my income in that country?

And does anyone have any pointers on whether I should be looking into the foreign earned income exemption rather than the foreign tax credit?

Thanks so much for any guidance!

File your return in Canada first. You do not include your US income earned after you left Canada. Then file your US return and declare your Canadian income and tax paid. No idea which exemption/credit is better in the US.

 

[Alex54321]

File your return in Canada first. You do not include your US income earned after you left Canada. Then file your US return and declare your Canadian income and tax paid. No idea which exemption/credit is better in the US.

Not correct I think.

You were a Canadian resident from taxation point of view for whole 2018, and partial US resident in 2018 (less than 183 days). I think I was in similar situation previously.

As I remember ( it was in 1998) I filed first US taxes on US income as US partial resident by April 15th. After that I've filed my Canadian taxes on my worldwide income for 2018 (Canadian + US) by April 30th and claimed foreign tax credit on my Canadian tax return on money I've paid to US.

The next year I became US resident and did not file Canadian taxes ( right or wrong) on my US income - but this is different topic.

 

[canuck_in_uk]

Not correct I think.

You were a Canadian resident from taxation point of view for whole 2018, and partial US resident in 2018 (less than 183 days). I think I was in similar situation previously.

As I remember ( it was in 1998) I filed first US taxes on US income as US partial resident by April 15th. After that I've filed my Canadian taxes on my worldwide income for 2018 (Canadian + US) by April 30th and claimed foreign tax credit on my Canadian tax return on money I've paid to US.

The next year I became US resident and did not file Canadian taxes ( right or wrong) on my US income - but this is different topic.

Not sure why you would think OP would be a tax resident of Canada for the whole year when they moved to a different country in August.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html#wr

 

[Alex54321]

Not sure why you would think OP would be a tax resident of Canada for the whole year when they moved to a different country in August.

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html

https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/leaving-canada-emigrants.html#wr

Maybe you are right and now different rules, but I remember that when I moved to US in September 1998 I filed US taxes only for US income and Canadian Taxes for the whole year (Can income + US income) and claimed foreign tax credit ( on taxes paid to US) on my last Canadian tax return.

 

[mad_hatter]

You need to file a Canadian departure tax return for income earned in Canada only. Since both US and Canada have the same taxation year, Jan to Dec, both tax returns are to be filed at the same time. You just need to calculate your Canadian tax obligation and claim that on your US tax return for credit.