J1 Visa, Foreign tax credit question

I worked as a Student J1 Visa for a few months last year. I already filed my US taxes. I have a Canadian tax question.

I have enough tuition credits to offset all the taxes before using the foreign credit, leaving me with a foreign credit that might not have any use in the future. I was looking for any information on credit ordering and could not find anything on foreign credits.

Does anyone have any knowledge on this subject?

Foreign credits in what respect?

If you've worked in the US then you can claim a foreign tax credit on T2209 and T2036, but that's to do with your job, not your tuition.

Just as a note on this issue, if you have sufficient foreign TAX credits to reduce your Cdn income tax to zero, you can carryforward the TUITION credits to a future year(since they are for your education) . Since foreign tax credit cannot be carried forward, it would be wisest to use these first, and use tuition afterwards.

I have a related question about my Canadian tax return:

I have $23K in unused education credits, negligible CDN income, and 50K US income from working there for some months (not enough to be a US resident). On my Canadian tax return,I HAVE to use my education credits, which reduces my basic federal tax, which in turn limits the amount of foreign tax credit available to claim. If I can't limit my education credits, and can't carry forward foreign tax credits, aren't I getting screwed somewhat? Am I doing something wrong ... or is this really setup so that my few months spent working in the US wipes out years of tuition credits without giving me anything near its full 15%?

Isn't this essentially double taxation?

The simple fact is nothing that reduces your Cdn tax only will do anything to reduce the US tax you owe on US surce income.

But, I question if you really 'have to' use your tuition credits immediately, or can you hold them until future.

The only 'have to' I recall on these is that if you want someone else (parent, etc) to use these credits in the year they were earned, then you MUST first use whatever is needed to reduce your fed tax to zero, and then have the other person use the rest.

I'm not sure such a requirement exists in subsequent years, when only you can use them. If that is the case, save them until a year when you have no foreign tax credits.

The guide states: "You have to claim your carry-forward amount in
the first year that you have to pay federal tax.". I'm quite sure that your foreign tax credit will wipe out all the federal portion of the tax on your US wages (you may have some prov tax to pay), so you may be able to save those until later.

I'm in a similar situation. James and Eugene, have you got any answer?
Thanks.

I really don't know konta, and the deadline is this Friday.

There is no mechanism for limiting your use of education credits, except hitting zero. Is that right anyone?

My foreign tax credit gets limited by the fraction of US income times my basic federal tax, which is the tax I owe after applying tax credits such as education credits. So if I had enough education credits to reduce my basic federal tax to zero, that would also mean I get zero dollars in foreign tax credit.

To summarize, I have $23K of accumulated education credits, go on an internship in the US for a few months and in addition to paying taxes on that income, I "pay" the Canadian government $23K*0.15=$3450 for the privilege of working out of the country by absolving them from the tax credits owed to me. Someone pleeeeeeeeease tell me I'm doing something wrong! I otherwise can't believe our government is disincentivizing us from gaining professional experience out of Canada.

I've given you my answer. Don't claim any of your tuition amounts, and see what happens. My opinion is that you will be able to use the credits later.

And why would the Cdn govt give incentive for subsidizing your education and then have you move to US?

You mean don't report my tuition amounts carried over or my tuition from 2009? As long as they're on the return they HAVE to be applied unless you have a zero "amount owing". I confirmed this with CRA over the phone. In addition there's no way to limit and carryover foreign tax credit or apply it to a previous year. So basically I'm hosed and my accumulated $23K in tuition credits gets traded for a couple hundred dollars difference out of pocket instead of the $3500 they're worth.

Absolutely the government shouldn't incentivize further brain drain into the US, but the side effect on TEMPORARY employment (ie. internships) has profound implications for higher education. Specifically for professional degrees such as engineering, you're a fool to pursue one without one or two internships for relevant work experience. But now going out of the country for this (ie. to one of the many high-tech companies south of the border) you do this at the expense of losing your tuition credits. Along with it goes the tax incentives for seeking PERMANENT employment in Canada after returning to school and graduating. What a travesty.

One of the hiccups of cross-border work. As you say, had you moved to US more permanently, you could have carried forward your credits until you returned.

CRA telephlunkies don't always have the right answer (they are better than IRS telephlunkies), but they are correct about foreign tax having to be used in the year they are incurred.

You might want to look at this more as your US credits not being usable, and look at reducing those taxes for 2009. How did you file in US?

And since you don't owe any Cdn tax, don't feel pressured to file by tomorrow, you can file whenever you want.

I'd also look at just using your 2009 tuition, not previous years. But the mechanics of FTC are designed to minimize giving you credit, which is exactly want has happened in your case.