Dual citizen, need tax advice

I am a dual US and Canadian citizen, living in Michigan for about one year. I paid US federal and state taxes through my employer. I filed a tax return and even got a stimulus check so I could help "boost the ecaanomy" .

However, I will be returning to Canada in a couple of months. I still have financial ties there: a bank account, car insurance, and student loans that I have kept up with. I never even got a Michigan license since I always knew I was going to return.

But I still need to file my Canadian taxes for 2007. I read some of the other threads on this topic but they were all for people with TN-1 visas. There was a pamphlet someone linked but it specifically said that it was not applicable to my situation.

Some guidance would be much appreciated.

If you're a US citizen you have to file a 1040 tax return every year in the US forever. Once you cease to be a resident of the US (the definition is on the IRS website) you claim a foreign tax credit on Form 2555 so you don't get dual-taxed on your Canadian income, BUT for 2007 it only goes up to the first $85,700 of income. After that you have to pay tax twice in the US and Canada on income over that amount.

There is a Bill in Congress at the moment to repeal the limit and the Democrats support it (the Republicans imposed the limit, the idea is to stop rich people moving to tax shelters and not paying tax), but I'm not sure when it will pass, but it probably will at some point.

From the Canadian standpoint, it's dead simple, you file taxes just like everyone else does, just like you always did. If you have income in the US that you're taxed on (i.e. your salary), you claim the foreign tax credit in Canada as described in the general guide for the T1 tax return.

The US is very bizarre in requiring everyone to file a tax return even if they no longer live in the country.

Bear in mind you have to cut any residental ties to the US (they're described in the IRS documentation, basically anything only a resident could get) otherwise the IRS can say you're still resident and you get dual-taxed on everything.