Hello, I am a US resident with a Canadian property rental and I am struggling to understand how to properly do my US taxes to avoid double taxation. Here is what I am doing (using the TurboTax desktop app):
1. I fill out my taxes in the US, adding the Canadian rental income and expenses on Schedule A as I am supposed to. After income and expenses are entered in, it shows that I owe taxes on the gain in the US (I made a small profit on this rental of about $4,000, so now this is added to my US income). I am in a high tax bracket in the US so this $4,000 is being taxed to the max.
2. I fill out Form 1116 for the foreign tax credit which helps a bit (by about $300).
What I am not understanding is that clearly this $300 is not enough to even things out and avoid double taxation. My income in the US where I work full time is much higher than my income in Canada from this rental. So when this rental income is added to my US income, I pay a significant % on it in taxes. The $300 foreign credit does not make up for that.
What am I missing here?
Thanks in advance.
