J1 Visa, Foreign tax credit question

Fast forward to 2011, and I'm having pretty much this exact same issue.

The tax forms basically "force" you to use the education and tuition credits to reduce your tax BEFORE you claim the foreign tax credit. Unused education credits can be carried forward to future years only AFTER you've applied them to reduce your tax to $0. Once you've done that, the foreign tax credit is wasted, and it cannot be carried forward.

There must be some workaround because it doesn't seem fair. Has anyone found any insight into this?

I am a Los Angeles based Attorney and CPA who handles cross-border US-Canadian tax matters. Feel free to reach me through this site if you need assistance with your US and/or Canadian tax filings.

Quick question about carrying forward tuition credit as a non-resident of Canada. I moved to US in 2011, while still having some tuition credit remaining. I know that tuition credit can be carried forward indefinitely as a resident, but do they become lost if I become a non-resident and then go back to Canada after several years? Thanks.

No.
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My wife and I have been in the US since 2007, first as F-1/F-2 and then J-1/J-2 while I work on my PhD. We have had this exact problem since we've been here and have found no alternative solution. My wife's tuition credit has been completely used up and, although mine is still being generated year-to-year as a student, immense portions of mine are consumed annually. I share in your frustration. The tax break I expected to receive upon finishing my studies and returning to Canada will basically not exist. Instead, the tuition credits have been wasted in preventing double taxation on my student stipend.

Its a known issue. But, if you think of it, canada was giving you this break in order to make life easier for you whane you began working -- in canada.


The problem is that under CRA, IRS, and treaty rules, you didn't leave canada. Had you, your credits would be there when you return. It's a dab quirk in the order in which your credits are being used.