Factual Resident Cdn/US filing

What a wonderful web site with valuable information. thank you.
I am a Canadian under L1 status and relocated to Arizona in July 2007 for work. My family is with me.
CRA has ruled that we are Factual Residents of Canada, so we file both in the US and Canada.
We do own a home (residence) in Canada still and have ties, and plan to return.
Few tax questions.
1)Since we file in Canada our world wide income, we are renting a house in the US - can we deduct this as an employment expense, as we still have our principal residence in Canada? If yes, where on the Canadian return?
2)I have contributed to a 401K plan in the US - can I claim a registered pension plan reduction on line 207 of Canadian return?
3)Federal Foreign tax credits- what does this include from the W2? I read FICA on a previous question. I am not familar with FICA? Does FICA mean, Federal Income Tax Withheld (box 2), Social Security tax withheld(box 4), Medicare tax withheld(box 6) and State Income tax(box 17)? Or does the Foreign tax credit mean only Federal and State income tax?
4)Can Canadians living abroad file electronically? versus sending a paper copy?
Most appreciated for the clarification.

Renting a house generally isn't an allowable employment expense, except in rare situations. Look at the CRA guide for allowable expenses.

2 - no you claim it on the 1040NR. Although I have to say this one is a bit of a grey area because of the change to the tax treaty last year, even the T1 guide is very vague about it, says to call them which I'm sure will be a lot of fun.

3 - Medicare and Social security are FICA, you can claim these as a federal foreign tax credit (due to the tax treaty) as well as federal income tax on T2209, claim a Provincial tax credit for the State income taxes on T2036, the general guide for the T1 explains how to do it, use the exchange rates on www.bankofcanada.ca or the CRA average rate for the year.

4 - can't see why not, your tax return isn't that unusual. I'm not sure if you can file T1135 electronically though with a lot of tax software, you may be required to file it in your situation.

Bear in mind when you file 1040NR that you can file jointly on it as a Canadian, provided your spouse isn't earning over the exemption limit.

Hi Steven.
What happens if the US taxes paid (on T2209) exceed the Canadian federal tax...can't the US paid taxes remaining balance be applied against the Canadian provincial tax calculation, as part of the Provincial foreign tax credit?
Clarification on T2036- the provincial foreign tax credit refers you to use the Federal Foreign Tax Credits.
So on T2209 - the Federal tax credit on line 1, I calculated the Non-business tax paid to a foreign country to include Federal tax, State tax and FICA. This is then compared to the Canadian basic federal tax + Surtax on Line 2. On line 3 it says to choose lesser of 1 or 2. This amount of course is the Federal non-business foreign tax credit.
Can one choose a number to be less than line 1, to offset the Federal tax on the return, leaving a balance for the provincial foreign tax credit to be use against the provincial taxes?
The reason I ask this is due to the Provincial Foreign tax credit calculation.
Before you complete T2036, it says to complete the federal form and if the amount of federal tax credit you are entitled to deduct is equal to the foreign non business tax you paid, your provincial tax credit would be zero.
Let me further clarify using numbers:
Form T2209
Line 1 10,000
Line 2 15,000
Line 3 7,000 (as T1 line 429 only needs this, versus 10,000)
On form T2036, the Federal Foreign tax credit of $7K is less than $10K, and thus have $3K to apply toward Provincial credit.
Am I correct in this interpretation? Else there will be no provincial foreign tax credit even though the $3K is not necessary for the federal.
thanks

Rather than me try and work out your math, my suggestion would be to run this past the CRA or get one of the better software packages that can do foreign tax credits.

Studiotax is free but I don't know if it can do a foreign tax credit.