J-1 Visa holder: Do I have to pay taxes to Canada and USA?

Hello. I am a Canadian living in Philadelphia doing research. I have lived here since july 2007. I am trying to fill out my canadian income tax form for my wife and I and I am confused as to where I claim the foreign tax credit.

Can I claim all of the taxes that I paid in the US, including state and city tax?

If we pay the standard amount of tax in the US will we own money to Canada? As my wife will probably be moving back to Canada next year we have to stay as factual residents of Canada. For some reason when I fill out the form it seems to look as if we will owe a substantial amount of tax to Canada. That just doesn't seem right!

Thanks for any help,

John

It probably is right, as the Canadian income taxes are usually significantly higher, so you have to pay the difference.

Read this: http://www.cra-arc.gc.ca/E/pub/tg/p151/README.html

Not sure how the tax works in Philadelphia, but you can claim a Provincial tax credit for the State income taxes, you need to use Forms T2209 and T2036, the general guide for the T1 explains how to do it.

You can also include FICA taxes (social security and medicare) in your tax credit claim because of provisions of the tax treaty.

Also have a read of IRS publication 519 which is more detailed.