QUESTION:
My husband is just in the process of moving to Canada from the USA. He will
be paying child support to his ex-wife for his 3 children. From what we can
see on the IRS website (46 pages of info, so we could be wrong...) he must
continue continue to file US taxes even after he is a permanent resident of
Canada. Is this correct? If so, he is entitled to claim 1 of the children
for tax purposes (as outlined in the child custody agreement). Does he
claim the child on his US or Cdn tax return? Would the child support
payments be claimed on US or Cdn taxes? Any information you are able to
provide would be very much appreciated. Thank you!
-------------------------------------------
david ingram replies:
Child support has never been a deduction in the United States and has not
been a deduction in Canada since May 1997.
Therefore he will not be able to deduct the child support in either the US
or Canada.
Canada has not allowed a married person to deduct a child since 1983. We
made up for it by increasing the Child Benefits but he is not entitled to
the benefit because the child does not live in Canada.
He should give his ex-wife (mother of his children after-all) the right to
deduct all three children. She will get a benefit at least. He does not
need to make it permanent because you may all move back to the US and then
he could use the deduction again.
You are correct. He has to file a US tax return for all the time he is in
Canada (or any other country) even if he has no US income. He will either
exempt the Canadian earnings on form 2555 or he will claim a foreign tax
credit (my favourite because of carry-forward possibilities) on form 1116.
He should have someone like us prepare the first year Canadian and US
returns.
For instance, if you are married, we could file a US joint return which
should save him significant US tax dollars even though you did not live in
the US.
goto www.centa.com and read the Oct 1993 newsletter (12 pages) on dual
citizenship, the Oct 95 newsletter (8 pages) on what an American Citizen in
Canada has to file for US purposes (obviously nothing new here and the US /
Canada Taxation (29 pages) on the forms necessary. The first two are to be
found in the top box on the left hand side and the third is in the second
box down on the right hand side.
=================
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