Giving up a green card

QUESTION: Hi David. Thanks in advance for consideration of my questions.

How should the Cdn maternity benefits (UI payments) be classified for reporting in the US? I was trying to determine whether it would be a valid argument to include this as earned income (excludable under Form 2555) rather than taking a foreign tax credit on this income. Because of the substantial decrease in my income this year, we are having to pay taxes to the US and I was trying to minimize our exposure. (Filing Form 1116 alone does not allow us any additional child tax credits because our income is otherwise above the threshold).

Also, any thoughts on tax considerations of giving up my greencard? My husband is a US citizen so we would still have to continue to file in the US, however at least I wouldn't have to report my income and he can file as Head of Household. Is this more beneficial than filing jointly?

david ingram replies:

The 1040 has a line for unemployemnt insurance. It does not qualify for form 2555 exemption.

If your husband is a US citizen, you can be sponsored back but it will still take 15 to 18 months and cost a lot of money at the time.

I believe that you should continue to hold your green card.

Paying tax to Canada on the value of your maternity benefits should be enough to cancel any tax to the USA on form 1116.

You might want to recalculate.