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Hi David,
I am a Green Card holder living in Canada and
paying world income tax to both the US and Canada.
My question is regarding the US/Canada tax
treaty.
I earn US self employement income (schedule C)
and pay my taxes to the US first. Does the treaty allow me to deduct the US
taxes I pay from both Canadian Federal and Provincial taxes due. Or, can I only
deduct US taxes paid from Provincial taxes due if my income is employment
rather than self employment income.
I've been unclear on this for awhile. Thanks,
JXXXXXXXX
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david ingram replies
1. If you are living in
Canada and the self-employment work is in Canada, you would pay tax on this
income to Canada only up to about $120,000 Canadian of earnings.. After that
you would claim a foreign tax credit on the next $60,000 or so Canadian and the
end result would be no tax on earnings in Canada up to about $180,000 Canadian.
You would not pay US Social Security.
2. If your self-employed
income was earned in the US and you lived in Canada as your question seems to
imply, you would pay tax to the US first but not pay US Social Security because
you are a resident of Canada and have to pay CPP first.
In this case, you would be taxed on the income
in the US first and claim and likely receive a 100% credit for the tax paid to
the US on your Canadian return.
I think though that you are
likely living in Canada and receiving money from the US for services performed
in Canada. In this case, the money is considered earned in Canada and
situation "1" above applies. Taxation does not matter where you are paid
from, it depends upon where you perform the services.
Goto
www.centa.com and look at the first
page of the Nov 2001 newsletter. This page tells you who has to pay tax
to the US (if you are a Canadian) and the rest of the newsletter tells you how
to make your CANADIAN mortgage tax deductible.
david ingram - www.centa.com
108-100 Park Royal South West Vancouver, BC, CANADA, V7T 1A2 (604) 913-9133 - Fax (604) 913-9123 cell (604) 657-8451 (10 AM to 10 PM 7 days)US / CANADA / MEXICO Income Tax and Working Visa Matters |
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