RSUs Granted in Canada, Vested in the US – Double Taxation Concern

[renanernesto]

Hello,

I relocated from Canada to the US while working for the same company. I was awarded RSUs in Canada, but a portion of them vested after I moved to the US. When I received my tax documents, I noticed that the vested stock value was reported as part of my total income in both countries:

• My T4 (Canada) includes the full value of the vested RSUs as taxable income.
• My W-2 (US) also includes the same RSU value as part of my total income.

From my understanding, Canada has specific tax rules for RSUs if you move out before vesting, where if they were awarded while I was a Canadian resident, I owe tax on the gain based on the proportion of time I spent in Canada between the grant and vesting dates. However, my employer appears to have reported the full stock value as taxable income in Canada rather than a prorated amount.

Is my employer correct in including the full RSU value on both tax forms? More importantly, how can I avoid double taxation in this situation? Would I need to claim a foreign tax credit or request an adjustment?

I appreciate any insights! Thank you in advance!

[ThomasM125]

If you are a US citizen, your employer was correct to report the income for the full year on your W-2 form. If you are a Canadian citizen, it should only have been included for the time you worked in the United States most likely. I can't comment on what would be reported on the Canadian earnings statement as I don't deal with Canada tax laws.

To compensate for the double taxation issue on your US tax return, you can make an entry for a foreign tax credit on your US tax return and your tax will be reduced by the amount of the tax paid to Canada up to the amount of US tax based on foreign income in 2024.

To apply for the foreign tax credit, go to the Estimates and Other Taxes paid section in  the Deductions and Credits area of TurboTax to assign your foreign income to Canada and enter in the foreign tax paid. Choose the Foreign Taxes option and indicate that you want to take the credit as opposed to the deduction, as it normally gives a better tax benefit.

[RobertB4444]

Based on my understanding of Canadian tax law you're correct that the RSUs only become taxable upon vesting.  However, it looks like there are a couple of exceptions to that rule.  Your employer probably knows better than we do about Canadian tax law.  I would still ask, though.  

As far as entering the foreign taxes for US credit the answer is yes, you will enter the full amount of tax paid on anything that is also taxed in the US.  The foreign tax credit is in the deductions and credits section of TurboTax.  Enter the amount there and that will be credited against your taxes due here so that you avoid double taxation,

@renanernesto