QUESTION: Hi, I'm a US citizen living in Canada for the last few years. As a citizen of the US I'm required to file a 1040 and declare my worldwide income. However, being a resident of Canada and working in Canada I am also required to file a T1 and TP1 (Quebec residents) on my worldwide income. I declare my salary, interest and dividends and also claim the foreign earned income exemption and foreign tax credit (taxes paid to Canada). I declare the same salary, dividends and interest income in Canada. Everything was Ok in the past but this year I had an additional $3,500USD to pay on the US 1040. I thought I could claim this $3,500USD as a foreign tax credit on the Canadian side. I was wrong, CRA says I can't claim the amount as a foreign tax credit because the tax is paid on income originating in Canada and is not a foreign income. That means I'm being taxed twice. Is there any way that this money can be recovered? My salary has increased substantially so the foreign income exemption does not offset my salary and the US foreign tax credit does not fully offset my US tax liability. I thought the tax treaty is supposed to avoid situations of double taxation. I don't think my case is unique, there are plenty of Americans living and working in Canada filing 1040's. I would appreciate any ideas you may have in finding a solution. Thanks =============================== david ingram replies: Your income for the year must have been over $260,000 US to end up with a $3,500 US AMT (alternative Minimum Tax bill). It is unusual that this would have been the first time that it ocurred. Your income must have doubled this year in US dollars for that to happen. Of course, because of the change in the exchange rate, there was a 35 to 40% increase because of exchange alone. One solution is for you to have US source investment income. Make your investments in the US and they will create a US tax liability first which will take away from the AMT amount and which WILL be deductible as a foreign tax credit in Canada. A second solution would be for you to perform some of the duties for your company in the US. The US duties would be taxed in the US first, take away from the AMT amount and be a tax credit in Canada. Answers to this and other similar questions can be obtained free on Air every Sunday morning. Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am a permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE talk show called "ITS YOUR MONEY" Those outside of the Lower Mainland will be able to listen on the internet at www.600AM.com <http://www.600am.com/> Call (604) 280-0600 to have your question answered. BC listeners can also call 1-866-778-0600. Callers to the show and questioners on this board can also attend the Thursday Night seminars on finance and making your Canadian Mortgage Interest deductible. David Ingram's US/Canada Services US / Canada / Mexico tax, Immigration and working Visa Specialists US / Canada Real Estate Specialists Home office at: 4466 Prospect Road North Vancouver, BC, CANADA, V7N 3L7 Cell (604) 657-8451 - (604) 980-0321 Fax (604) 980-0325 Calls welcomed from 9 AM to 9 PM 7 days a week (please do not fax or phone outside of those hours as this is a home office) email to taxman at centa.com <mailto:taxman at centa.com> www.centa.com <http://www.centa.com/> www.david-ingram.com <http://www.david-ingram.com/> Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. 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