US Citizen, Canadian Resident - lives & works 100% in Canada

Forum|Forum|1 year ago
March 7, 2025
2 replies
6 views

I have a US citizen that moved to Canada at the end of 2023. For the 2024 tax year he lived and worked in Canada. He is still a US citizen, but he is also a Canadian resident. My research, if I understand this correctly, is that Canada & US have an agreement that exempts a US citizen from being taxed by the US on income earned and taxed in Canada. However, it goes on to say the exemption is driven by proper completion of US 1040 return. I'm assuming I have to show this income somewhere on the 1040, and then do something to show it is not taxed by US. Does anyone have any experience with something like this? Can you let me know what forms I should be completing? Thank you.

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BobKamman

Level 15

You don't understand it correctly. Most tax treaties are meant to provide benefits to nonresidents of the country that would otherwise tax the income. You're dealing with a resident. Actually, TurboTax has a fairly good introduction to this situation:

https://turbotax.intuit.ca/tips/the-usa-canada-tax-treaty-explained-14788?

J

JSKAuthor

Level 4

Thank you for the link. I had read that previously, and that's where I read that Canada taxes citizens & residents, but that the US will not tax it if the person lives in Canada (which he does, permanently). However it goes on to say this income still needs to be picked up on a 1040, and then shown it's exempt.

BobKamman

Level 15

That is not what you are reading, that is what you wish you were reading. Good idea to refer him to someone else, especially since now you mention he married a Canadian.

T

Terry53029

Intuit Community Champion

You have to file a 1040, and claim world wide income. For 2024 you can file form 2555, you can exclude up to $126,500 of your foreign-earned income. you can also file 1116 foreign tax credit which ever gives you the best outcome. The treaty only exempts income from us company, and your client is not residing in Canada

J

JSKAuthor

Level 4

My client is residing in Canada. He lives there permanently, and works for a Canadian company. My concern is he is an American citizen, and he still has bank accounts here that are earning interest & dividends. He is filing a tax return in Canada, but I believe he has to include that income on his 1040, along with his interest & dividends from American sources. However, I don't think the Canadian income is taxed here (I could be very wrong). Additional info - he married a Canadian citizen so I know I will file a married filing separate return, and he will have to paper file because she does not have an SSN or ITIN. I told them I wasn't too familiar with this, and suggested he speak to another accountant, but he asked if I could help. So here I am...Thanks for your help. Any additional input is greatly appreciated.

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