Personal Finance

I am a Canadian/U.S. Expatriate Tax Expert. Any questions?

  • Last Updated:
  • Oct 1st, 2019 9:11 pm
Newbie
Oct 7, 2018
64 posts
25 upvotes
ro_otbear wrote:
Feb 12th, 2019 4:16 pm
On your 2017 US tax return, did you claim itemized deductions or standard deductions? If you claimed standard deductions, the state tax refund is not considered income for US federal tax purposes in 2018. However, if you itemized deductions, it does get quite complicated. The short answer is "maybe" if you claimed itemized in 2017. You will need to file out this assessment on the IRS website to see if the state income tax is considered taxable income in 2018.

You can refer to the IRS website here: https://taxmap.irs.gov/taxmap/instr/i10 ... nk10002814
On the 1040NR of my 2017 return for Schedule A, I only have box 1 filled out. There are no other items filled out there. I had an account do my previous years due to living in canada and getting paid on the us payroll (w2)

On my 540NR it does not have mention of itemized deductions.
[OP]
Jr. Member
Aug 10, 2008
120 posts
34 upvotes
Toronto
pachimari04 wrote:
Feb 12th, 2019 4:24 pm
On the 1040NR of my 2017 return for Schedule A, I only have box 1 filled out. There are no other items filled out there. I had an account do my previous years due to living in canada and getting paid on the us payroll (w2)

On my 540NR it does not have mention of itemized deductions.
Gotcha - in that case you didn't claim any state taxes paid in the prior year as an itemized deduction. This means the 1099-G state tax refund you received in 2018 is not taxable and therefore, you don't need to report anything for 2018.
Newbie
Oct 7, 2018
64 posts
25 upvotes
ro_otbear wrote:
Feb 12th, 2019 4:40 pm
Gotcha - in that case you didn't claim any state taxes paid in the prior year as an itemized deduction. This means the 1099-G state tax refund you received in 2018 is not taxable and therefore, you don't need to report anything for 2018.
Awesome, thanks a lot for the information!
Newbie
Jan 12, 2019
27 posts
2 upvotes
Ottawa, ON
I filed my FBAR and started preparing Form 8938, Specified Foreign Financial Assets, and in the process, I just remembered that I had 3 accounts in 2018 that I never used (i.e., always had 0 balance) and I closed within a few weeks or months after opening. Do I need to report those? They were with 3 bricks and mortar banks where I do have other accounts that I used and reported. I had forgotten about the closed accounts because I was taking inventory of my accounts by logging in and the closed accounts understandably were not showing. I have noticed that when you open bank accounts at bricks and mortar banks here in Canada, you have to do so in person, and the bankers like to open additional accounts that you don't necessarily need. I just moved to Canada for the first time in mid 2018, so all my Canadian bank accounts were opened in 2018. So, my question is do I need to report on both the FBAR and Form 8938 these 3 accounts that I never used (always 0 balance and closed soon after opening)? I have already reported other accounts at these banks that I did use or still have open.
Deal Addict
Jan 16, 2016
1359 posts
993 upvotes
Hamilton, ON
Most everyone says that Canadian expats should close their TFSA because of the additional paperwork required.

1. What is your stance on it, is it a Trust or an FDE?

Excepting this one form, 3520 if it’s a trust and 8858 if it’s not, I fail to see any additional benefits one would get from closing their TFSA. If the contents are held in a non registered account, they’ll most likely be PFICs, in which case even if they were in the TFSA or not, the account holder would have to file additional forms to claim QEF or MTM status. When sold, if it’s in a non reg, they pay capital gains tax to Canada and claim a tax credit in the US. If the individual ever moves back to Canada, this is really the icing on the cake, as their money could have grown tax free.

2. What are your thoughts on the above statement? Is there anything I might be missing?

Thanks!
Sr. Member
Nov 12, 2014
769 posts
498 upvotes
Kingston, ON
Altera wrote:
Feb 17th, 2019 2:48 pm
Most everyone says that Canadian expats should close their TFSA because of the additional paperwork required.

1. What is your stance on it, is it a Trust or an FDE?

Excepting this one form, 3520 if it’s a trust and 8858 if it’s not, I fail to see any additional benefits one would get from closing their TFSA. If the contents are held in a non registered account, they’ll most likely be PFICs, in which case even if they were in the TFSA or not, the account holder would have to file additional forms to claim QEF or MTM status. When sold, if it’s in a non reg, they pay capital gains tax to Canada and claim a tax credit in the US. If the individual ever moves back to Canada, this is really the icing on the cake, as their money could have grown tax free.

2. What are your thoughts on the above statement? Is there anything I might be missing?

Thanks!
Google Max Reed TFSA...if your accounts are held in a non-reg account and NOT mutual funds (ie stocks or gics) then you have no PFIC issues to worry about. TFSA income is also taxable on the US return, so it's only tax free in Canada.
Deal Addict
Jan 16, 2016
1359 posts
993 upvotes
Hamilton, ON
QN5252 wrote:
Feb 17th, 2019 6:27 pm
Google Max Reed TFSA...if your accounts are held in a non-reg account and NOT mutual funds (ie stocks or gics) then you have no PFIC issues to worry about. TFSA income is also taxable on the US return, so it's only tax free in Canada.
Yes I've gathered that much and have read his blog posts for the law firm he works for. Also there seems to be people who think it is a trust and I don't know why. I'm trying to understand why there is such a stigma on getting rid of the TFSA if its literally one extra form you have to file annually (and I say one form, because, if you held those same investments in a non-reg you'd either be holding PFICs or not)
[OP]
Jr. Member
Aug 10, 2008
120 posts
34 upvotes
Toronto
Altera wrote:
Feb 17th, 2019 7:05 pm
Yes I've gathered that much and have read his blog posts for the law firm he works for. Also there seems to be people who think it is a trust and I don't know why. I'm trying to understand why there is such a stigma on getting rid of the TFSA if its literally one extra form you have to file annually (and I say one form, because, if you held those same investments in a non-reg you'd either be holding PFICs or not)
Your right - it’s exactly that one form (3520/3520-A) that most accountants would advise US citizens/residents to close the TFSA (if situation arises). Given that it is treated exactly the same in the US as a non-registered investment, there isn’t any benefit for US citizens/residents to hold on them as it would be taxable either way.

For sure if you are a Canadian moving down the US, close those TFSA accounts and move them to non-registered accounts.

As a side note, the penalty for not filing the 3520/3520-A is $10,000 or more. That should be enough reason to not hold a TFSA if there is no tax beneficial reason for it as the From 3530 gets filed incorrectly quite often from my experience.
Sr. Member
Nov 12, 2014
769 posts
498 upvotes
Kingston, ON
Firms also charge like $2000 to prepare just the 3520 alone for a tfsa. That’s enough reason. You negate any earnings with fees to prepare the proper forms.
Newbie
Feb 16, 2019
1 posts
I'm currently a *PR of Canada* (I was a resident of Vancouver). I got a job in California in 2018 and am living/working in the US since a couple of months ago with a *US Green Card*.
I have already submitted my 2018 US Tax return via *turbotax.com*. Now for Canadian tax purposes, I was wondering if I do mention on *turbotax.ca* that I was a Canadian non-resident in 2018 and report my US income, will I have issues later with the IRCC; e.g., if I declare 2018 Canadian non-residency for tax purposes, will they take away my Canadian PR card or will I have issues entering Canada later at the airport?
On the other hand, if I don't mention on *turbotax.ca* that I have moved to the US in 2018 and fill out Canadian tax return as a Canadian resident, will I run into any problems; specifically, is my US W-2 and work information on *turbotax.com* already shared with *turbotax.ca*?
In short, my question is how can I deal with this situation? I don't have any issues with reporting Canadian non-residency in 2018 for tax purposes, just that I'm worried whether it's going to cause any trouble with the IRCC?
Thanks a lot for your help in advance
Jr. Member
Aug 19, 2016
163 posts
69 upvotes
This is more of a tax planning question, but something I'd like to understand, relating to the treatment of mortgages on US primary residences and Canadian rental properties.

Background: I am a US permanent resident (greencard) in WA state (no state income tax) and I own a condo in Ontario that is rented out. The mortgage is paid off, though there's still a line of credit registered as a mortgage (no balance). I file a non-resident return using my dad as the Canadian agent with CRA, NR4/NR5 process.

I am contemplating buying a home in the US. I can come up with >20% downpayment for the US home without remortgaging the Canadian property. As I see it my options for financing the purchase are:

a) Get a regular US mortgage and ignore the Canadian property.

b) Get a regular US mortgage for part of the funds AND remortgage the Canadian property as well using a Canadian lender

c) Same as b, but using a US lender secured against the Canadian home -- is that even possible?

As I see it there are some trade-offs here that might be worth considering, primarily relating to SALT deductions vs. itemizing, and possibly other factors:
-- Currently I take the standard deduction, married filing jointly, as I have nothing significant to itemize (renting here now and no state income tax)
-- The mortgage would presumably mean it's better to itemize, but it means giving up the standard deduction
-- Presumably a mortgage on a rental property is ALWAYS deductable, so I could still take the standard deduction, so there could be an advantage?

Some numbers:
-- The US home would likely be valued at ~1mil and incur $10k/yr in property tax
-- One way or another I'd need to borrow between 500k and 600k between the two properites, USD, leading to 20-25k in mortgage interest (declining over time obviously)
-- Canadian property is worth about $600k CAD so I could probably get around $250K USD out if I mortgaged it to 65% (as a NR, I need 35% down or something?)

So on the surface that's 35k in deductions if it's 10k+25k and so obviously I'd be itemizing. BUT,if I got say 250K USD of the money from Canada it could be I take the personal deduction and not itemize, if proptax+US-interest is less than 24k. Maybe not in the first year when the interest initially starts, but after a few years it could be less than the standard deduction if I keep shifting the debt to the rental property as I build capital. I

Is there any guidance on how to think about this? Is it just going to be such a huge headache that I should forget about it and stick to the US lender on US property, or is there some opportunity to come out ahead by mixing in a mortgage on the Canadian property?
Newbie
Jan 12, 2019
27 posts
2 upvotes
Ottawa, ON
Does Canada honor the tax sheltered treatment of US HSAs (Health Savings Accounts)? Some people seem to think Canada does respect the US treatment of HSAs, but I have not been able to find definitive guidance.
[OP]
Jr. Member
Aug 10, 2008
120 posts
34 upvotes
Toronto
trumprefugee wrote:
Feb 17th, 2019 1:30 pm
I filed my FBAR and started preparing Form 8938, Specified Foreign Financial Assets, and in the process, I just remembered that I had 3 accounts in 2018 that I never used (i.e., always had 0 balance) and I closed within a few weeks or months after opening. Do I need to report those? They were with 3 bricks and mortar banks where I do have other accounts that I used and reported. I had forgotten about the closed accounts because I was taking inventory of my accounts by logging in and the closed accounts understandably were not showing. I have noticed that when you open bank accounts at bricks and mortar banks here in Canada, you have to do so in person, and the bankers like to open additional accounts that you don't necessarily need. I just moved to Canada for the first time in mid 2018, so all my Canadian bank accounts were opened in 2018. So, my question is do I need to report on both the FBAR and Form 8938 these 3 accounts that I never used (always 0 balance and closed soon after opening)? I have already reported other accounts at these banks that I did use or still have open.
As long has you meet the Form 8938 reporting requirements , you will need to report even those 3 accounts with zero activity. It should be quite straight forward as it’s a pure disclosure and has no tax liability.
[OP]
Jr. Member
Aug 10, 2008
120 posts
34 upvotes
Toronto
LilyBart0 wrote:
Feb 17th, 2019 10:49 pm
I'm currently a *PR of Canada* (I was a resident of Vancouver). I got a job in California in 2018 and am living/working in the US since a couple of months ago with a *US Green Card*.
I have already submitted my 2018 US Tax return via *turbotax.com*. Now for Canadian tax purposes, I was wondering if I do mention on *turbotax.ca* that I was a Canadian non-resident in 2018 and report my US income, will I have issues later with the IRCC; e.g., if I declare 2018 Canadian non-residency for tax purposes, will they take away my Canadian PR card or will I have issues entering Canada later at the airport?
On the other hand, if I don't mention on *turbotax.ca* that I have moved to the US in 2018 and fill out Canadian tax return as a Canadian resident, will I run into any problems; specifically, is my US W-2 and work information on *turbotax.com* already shared with *turbotax.ca*?
In short, my question is how can I deal with this situation? I don't have any issues with reporting Canadian non-residency in 2018 for tax purposes, just that I'm worried whether it's going to cause any trouble with the IRCC?
Thanks a lot for your help in advance
At the end of the day, I think you should consult with an immigration expert as the real question is can you be Out of the country while still in the PR process. I believe you need to be living in Canada for a set amount of time so I’m not sure if residency matters. With that said, I am not an immigration expert and believe you should consult an expert accordingly.
[OP]
Jr. Member
Aug 10, 2008
120 posts
34 upvotes
Toronto
inside wrote:
Feb 18th, 2019 8:46 pm
This is more of a tax planning question, but something I'd like to understand, relating to the treatment of mortgages on US primary residences and Canadian rental properties.

Background: I am a US permanent resident (greencard) in WA state (no state income tax) and I own a condo in Ontario that is rented out. The mortgage is paid off, though there's still a line of credit registered as a mortgage (no balance). I file a non-resident return using my dad as the Canadian agent with CRA, NR4/NR5 process.

I am contemplating buying a home in the US. I can come up with >20% downpayment for the US home without remortgaging the Canadian property. As I see it my options for financing the purchase are:

a) Get a regular US mortgage and ignore the Canadian property.

b) Get a regular US mortgage for part of the funds AND remortgage the Canadian property as well using a Canadian lender

c) Same as b, but using a US lender secured against the Canadian home -- is that even possible?

As I see it there are some trade-offs here that might be worth considering, primarily relating to SALT deductions vs. itemizing, and possibly other factors:
-- Currently I take the standard deduction, married filing jointly, as I have nothing significant to itemize (renting here now and no state income tax)
-- The mortgage would presumably mean it's better to itemize, but it means giving up the standard deduction
-- Presumably a mortgage on a rental property is ALWAYS deductable, so I could still take the standard deduction, so there could be an advantage?

Some numbers:
-- The US home would likely be valued at ~1mil and incur $10k/yr in property tax
-- One way or another I'd need to borrow between 500k and 600k between the two properites, USD, leading to 20-25k in mortgage interest (declining over time obviously)
-- Canadian property is worth about $600k CAD so I could probably get around $250K USD out if I mortgaged it to 65% (as a NR, I need 35% down or something?)

So on the surface that's 35k in deductions if it's 10k+25k and so obviously I'd be itemizing. BUT,if I got say 250K USD of the money from Canada it could be I take the personal deduction and not itemize, if proptax+US-interest is less than 24k. Maybe not in the first year when the interest initially starts, but after a few years it could be less than the standard deduction if I keep shifting the debt to the rental property as I build capital. I

Is there any guidance on how to think about this? Is it just going to be such a huge headache that I should forget about it and stick to the US lender on US property, or is there some opportunity to come out ahead by mixing in a mortgage on the Canadian property?
There’s quite a bit going on here. Feel free to leave me a PM and we can discuss further as I think a phone call would be best given the different variable options and moving parts with your question.

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