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qz25

How to deduct US tax paid for US capital gain and dividents

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Hi all,

I am Canadian citizen working in US now. I have not declare non-resident status, so I have to pay tax on both sides.

I got w2, some dividents and capital gain (in the range of 10-20K USD). For w2 income and tax paid to IRS, it is easy to claim foreign tax credit. However, I had not find a way to claim foreign tax credit for the tax I paid for US capital gain and dividents.

My question is: what is the right way to deal with tax paid to US IRS for US dividents and capital gain when filing Canadian income tax?

Really appreciate any help. 

Qin

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Hello qz25,

T2209 - Federal Foreign Tax Credits

You may be entitled to this credit if you paid foreign tax on income that you have earned outside of Canada and reported on your Canadian tax return.

In order to claim this foreign tax credit, please follow the steps below:

1. Return to the "Left side menu on the Interview tab", select "Interview setup".

2.  On the right-hand side of the screen, go to the "Investment income and expenses" group, check the boxes for "Foreign income or foreign property (T1135)" and click "Next" at the bottom of the page.

3- Return to the "Left side menu on the Interview tab" and select the topic "Foreign income & property".

4- On the screen to your right, choose the applicable type of foreign income.

Regardless of the type of foreign income, you must enter:

- the foreign income, and
- the foreign tax paid.

5 - In the field for "Limit of foreign tax credit and deduction (T2209)", you can choose one of three options in the drop-down menu to your right (if you do not choose any of the options, the program will implicitly choose the appropriate form).

The program will generate federal Form T2209 and, as applicable, Form T2036 "Provincial or Territorial Foreign Tax Credit". Furthermore, for Quebec residents, the program will complete Section A of Schedule E, "Tax Adjustments and Credits", and will generate Form TP-772-V.

For more information on foreign tax, please consult the following links:

For the CRA:

http://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-405-federal-foreign-tax-credit.html

To Revenu Québec:

http://www.revenuquebec.ca/en/online-services/forms-and-publications/current-details/tp-772-v/

Income from foreign dividends

To enter the amount of income from foreign dividends, please follow the steps below:

1. In the "Left side menu on the Interview tab" select "Interview setup".

2. On the page that appears on the right, go to the "Investment income and expenses" group, check the box "Foreign income and foreign property (T1135)" and click on "Next" at the bottom of the page.

3- Return to the "Left side menu on the Interview tab" and select "Foreign income and property".

4- On the right-hand side, select "Income from foreign dividends".

5- Fill out the page accordingly.

T5008 - Statement of securities transactions

For the 2017 taxation year, we changed the T5008 slip information entry to make it more compliant when downloading data.

In addition, it should be noted that the document that your broker sends you is a summary of the original T5008 slip. Also, this document gives information about all your transactions while the T5008 slip is for one transaction. You must pay close attention or ask your financial advisor for more information.

To enter your gains (or losses), please follow these steps:

1. In the "Left-side menu on the Interview tab", select the heading "Interest, investment income and carrying charges".

2. On the right-hand page, click on the plus sign icon "+" located to the right of the line "T5008 - Statement of securities transactions".

3. On the page titled "T5008 - Statement of securities transactions" you need to enter more information depending on the type of transactions you have made.

4. On the line "Recipient type", you must choose from the drop-down menu the option that suits you.

5. If you made the transaction in foreign currency, in the "Foreign currency" lines in the drop-down menu, choose the currency type. Usually on the T5008 slip, the amount is in Canadian dollars, but it may be in foreign currency if the transaction is in foreign currency.

6. On the "Date of settlement (dd-mm-yyyy)" line, you must enter the date by indicating the day, the month and the year when you received the settlement of the security.

7. On the line "Type code of securities" in the drop-down menu, you must choose the appropriate transaction type.

8. On the line "Select the income type", you have two choices "Capital gains/losses" or "Investment income". For example, if you are reporting a loss, you must make the election based on the option "Capital Gains / Losses" that applies. We suggest you consult the links at the end of the text.

9. On the line "Cost or book value", enter the value at the time of acquisition of the property.

10. On the line "Proceeds of disposition or settlement amount", enter the value received at the sale of the property.

11. On the line "Outlays and expenses related to the transaction", enter the amount paid to your advisor.

It is very important to make the appropriate choice. If your T5008 slip reports both types of income, investments and capital gains, you will need to enter two T5008 slips, one for the investment and the other for the capital gain, and divide the amount in two according to the transactions you have made.

We recommend that you read the guide published by the CRA carefully.

Interest on bonds will be reported on line 121 and capital gains on line 127 of the federal return and Schedule 3 will be generated. For Quebec residents, interest will be carried forward on line 130 and capital gains on line 139 of the Quebec return and Schedule G will be generated.

For more information, please visit the following links:

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/personal-income/line-121-interest-other-investment-income/line-121-treasury-bills.html

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4091.html

http://www.cra-arc.gc.ca/E/pub/tg/t4037/README.html

http://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4037.html

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