I am a US citizen and my husband is a Canadian citizen and
resident. Apparently, we have a choice to treat him as resident
alien for tax purposes, allowing us to file jointly. Is there an
advantage to this? Because he has never lived in the US, will he
get foreign earned income credit for his wages earned in Canada
or will we have to pay taxes on those as well? I was a US
resident during the entire tax year in question.
Thank you!
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david ingram replies:
There is an advantage to you if your US income is over $29,700.
this is because your tax rate as a single person or married
filing separately is:
If Taxpayer's Income Is... Then Estimated Taxes Are...
Between
But Not Over
Base Tax
+ Rate
Of the Amount Over
$0 $7,300 $0 10% $0
$7,300 $29,700 $730.00 15% $7,300
$29,700 $71,950 $4,090.00 25% $29,700
$71,950 $150,150 $14,652.50 28% $71,950
$150,150 $326,450 $36,548.50 33% $150,150
$326,450 - - - - - $94,727.50 35% $326,450
Under this scenario, any part of your income over $29, 700 is
taxed at 25% or 10% more until $71,959.
However,
If you ARE MARRIED FILING JOINT, the tax rates are:
If Taxpayer's Income Is... Then Estimated Taxes Are...
Between
But Not Over
Base Tax
+ Rate
Of the Amount Over
$0 $14,600 $0 10% $0
$14,600 $59,400 $1,460.00 15% $14,600
$59,400 $119,950 $8,180.00 25% $59,400
$119,950 $182,800 $23,317.50 28% $119,950
$182,800 $326,450 $40,915.50 33% $182,800
$326,450 - - - - - $88,320.00 35% $326,450
In this case, you only pay 19% up to $14,600 instead of $7,300 (a
saving of $365.00) and then 15% for the next $44,700.. The
savings are over $4,000.
If you are a head of household, the rates are slightly less.
If Taxpayer's Income Is... Then Estimated Taxes Are...
Between
But Not Over
Base Tax
+ Rate
Of the Amount Over
$0 $10,450 $0 10% $0
$10,450 $39,800 $1,045.00 15% $10,450
$39,800 $102,800 $5,447.50 25% $39,800
$102,800 $166,450 $21,197.50 28% $102,800
$166,450 $326,450 $39,019.50 33% $166,450
$326,450 - - - - - $91,819.50 35% $326,450
You can see the savings easier if you just look at
the Base Tax on $326,450.00
The best method of exempting your husband's income is
to use form 2555, not form 1116.
REMEMBER - there is also a State savings as well in
43 states.
Form 2555 implies it is only useable by a citizen but
it also works for the "spouse" of a US citizen or resident alien.
We would be glad look after these for you.
David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working
Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week
Vancouver (LA) time - (please do not fax or phone outside of
those hours as this is a home office)
email to taxman at centa.com
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without
detailed information or consultation and is to be regarded only
as general comment. Nothing in this message is or should be
construed as advice in any particular circumstances. No contract
exists between the reader and the author and any and all
non-contractual duties are expressly denied. All readers should
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message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
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of US Canada Mexico non-resident and cross border returns with
rental dividend wages self-employed and royalty foreign tax
credits
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