Form 1116 Foreign Tax Credit

[mfdencolo]

I sold real estate in Canada in 2018 and I need to include Form 1116 (Foreign Tax Credit). I'm trying to find out which TurboTax product to use as I am not sure which product will include that form.

Thanks.

[MargaretL]

TurboTax Deluxe will handle Foreign Tax Credit, whether you choose Online Or Desktop version. Please see Where do I enter the Foreign Tax Credit in TurboTax for details on data entry. 

[mfdencolo]

Thanks very much, Margaret!

[drydenmd]

Hello,

I am a US citizen residing in Canada but working in the States. There is NO income in Canada of any kind.
When filing Canadian taxes, I ended up owing a substantial amount on my US income - which I filed taxes for in the US too. Canadian tax deadline is later than the US one so I found this owed amount only after I filed Canadian taxes. 
How and where do I amend my US taxes to claim the taxes I had to pay in Canada? I found TurboTax did not provide me with options relevant to my situation.

[drydenmd]

p.s. questionnaire asks for foreign income (none) but when I enter the amount of foreign tax paid (which is many multiples over $300), there is no change anywhere on any form. 

[pk]

@drydenmd , all foreign tax credit require foreign  income  -- because  the credit assumes & ameliorates  double taxation  ( income that is being taxed by two taxing authorities ).

In your case  ( as posted ), you sold a house --- ( main home,  second home , rental property or what ? ). There fore there is income ( hopefully gain ) that needs to be  taxed -- capital gain or otherwise.   Assuming that you are US citizen/resident  selling residential property, US taxes will treat this as if the asset was in the USA and tax  that as such ---- you need to tell a lot more  --- 1. what type of property  ( residential, industrial, farm, or ? );  2. Use  type ( your own main home, second home, vacation property, rental income , farm rental etc. );  3. Acquisition details   (when did you acquire the property  and for how much  , did you make improvements ,   etc. );  4.  Disposition  ( when did you dispose of the property, at arms length or to a relative, sales expenses, sales prep expenses, how much did you sell for , outright sale or installment sale   etc. );  5  Recoveries  ( did you  depreciate the property and if so at terms  etc. )  ;    6 Taxation  ( was the taxation on transfer / transaction or on the gain or what).  Once  yo have answered all these minor details then we can start to look at the 1116 aspect  of the question.

[drydenmd]

Unfortunately you didn't read the question I posted correctly. There is NO INCOME of any kind, no property sold. Could you please read it again? Thank you~

[drydenmd]

Unfortunately you didn't read the question I posted correctly. There is NO INCOME of any kind, no property sold. Could you please read it again? Thank you~ I work in the US, but am a Canadian resident (US citizen). I commute daily cross border since we live so close I kept my job when I moved up here.  I was advised by a professional accounting firm that deals with taxes on both sides to amend my return to include the taxes i had to pay to the CDN gov. And to fill the 1116 form .

[pk]

@drydenmd, my very humble apologies  for getting things mixed up and therefore answering  to "non-existent "  circumstances. 

As I NOW understand, your case is that of a US citizen whom is a resident of Canada and  with US (only) world income.

I refer you to the  US-Canada Tax treaty , of which at least two  articles are applicable to you  and I quote"

"ARTICLE XV
Dependent Personal Services

1. Subject to the provisions of Articles XVIII (Pensions and Annuities) and XIX (Government
Service), salaries, wages and other similar remuneration derived by a resident of a Contracting State in
respect of an employment shall be taxable only in that State unless the employment is exercised in the
other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom
may be taxed in that other State."

there are other ands/ifs/buts/nothwithstanding etc -- but in your the above  is fully applicable

"ARTICLE XXIV
Elimination of Double Taxation

4. Where a United States citizen is a resident of Canada, the following rules shall apply:
(a) Canada shall allow a deduction from the Canadian tax in respect of income tax paid
or accrued to the United States in respect of profits, income or gains which arise (within the
meaning of paragraph 3) in the United States, except that such deduction need not exceed the
amount of the tax that would be paid to the United States if the resident were not a United
States citizen; and
(b) For the purposes of computing the United States tax, the United States shall allow
as a credit against United States tax the income tax paid or accrued to Canada after the
deduction referred to in subparagraph (a). The credit so allowed shall not; reduce that portion
of the United States tax that is deductible from Canadian tax in accordance with subparagraph
(a).
........"

"6. Where a United States citizen is a resident of Canada, items of income referred to in paragraph 4
or 5 shall, not-withstanding the provisions of paragraph 3, be deemed to arise in Canada to the extent
necessary to avoid the double taxation of such income under paragraph 4(b) or paragraph 5(c)."

Thus there appear to be  at least two mechanisms to avoid the double taxation --- (a) a US citizen & resident of Canada can assert treaty conditions/benefits  to the Canadian authorities to get credit for taxes paid to the USA and (b) "resource" the US income as foreign income.

The issue here is that  (a) while you effectively have a Tax Home abroad, you do not qualify for Physical Presence test ( visiting USA every day );  (b) your income is US sourced.  One way would be to request  IRS to approve  "Bona-fide" resident status which will eliminate  the  330 days away from the USA as a requirement  and then resource  your income Canada.  If this is your first year doing this by yourself, would suggest seeking professional tax help  ( with one  whom is familiar  with Canada/ US taxation ) --- there should be quite a few  in the US or Canadian border towns  ( Detroit/Windsor; Buffalo/ Niagara etc. etc. )

Form 1116 is not applicable in this situation ( IMHO)