Question about $8000 tax rebate & transferring Cdn funds

[J-toronto]

Hi there,

My husband and I are thinking of buying a house later this year, and from everything we've read online, it sounds like we will qualify for the $8000 first-time home buyer tax rebate (we are H1B, waiting for greencard). Hopefully I'm not deluded about this! Has anyone else had experience with this yet?

Second question: Our down payment is in Canada, and at some point we want to transfer it to the US. Would I be taxed on any of this money? The other situation is that our parents may give us a bit of money to help us with the downpayment - would I run into any issues with this? I guess the other relevant bit of info is that we're moving my tax home to the US for 2009. There was a post about a student claiming a tax-home in the US, and that it could mean that money sent by his/her parents would be taxed...

Third question: I've been reading that the best way to transfer a large sum from Canada to the US is through a custom broker house. Does anyone know how long that usually takes, and which companies are most reliable/have best rates?

Any input would be appreciate, thank you!
J

[CanadianinLasVegas]

If I read the rules correctly, you will not qualify for the tax credit unless you already have your green card. Non-resident aliens cannot claim the tax credit and with the H1B I believe you are a non-resident alien. I would check with a tax professional when you file your taxes next year, if you have your permanent residency by then.

[Steven]

In theory if your tax home is in the US (i.e. you file a 1040) then they won't know that you're in a non-immigrant category, although I have surmised (as the USG don't exactly advertise it) that the IRS use the social security records to determine your immigrant status in certain situations. So the answer is you may or may not be able to claim it, depends on the small print and how thoroughly they check.

If you have money in a Canadian bank account for example and transfer it to the US this is not subject to tax, because it's a transfer of capital. If your parents give you money that can be treated as income, there's no gift tax in Canada so the advice would be for them to give you the money before moving your tax home. However if you do that now then you will have to file dual-status for 2009 and obviously the IRS will then know about your immigration status.

Customs House currency broker in Victoria is probably your best bet, because they're Canadian. Their website is www.xe.com

[J-toronto]

Thanks for responding so quickly!

Yeah, I guess it's unclear if we qualify for the rebate..we might, we might not. I think we could be considered resident aliens for 2009 since we're applying for residency and will also meet the substantial presence test. Anyhow, the best thing is probably not to count on getting it, and we may find ourselves pleasantly surprised at tax time next year.

Regarding transferring money from Canada to the US, it sounds like there is tax on gift money in the US, but not in Canada. What if one of our parents gave us a personal loan, and deposited that money into my Canadian bank account? Even though I am moving my tax home to the US, I will still be keeping some Canadian accounts. Do I technically have to report that somewhere?

[Steven]

Regarding transferring money from Canada to the US, it sounds like there is tax on gift money in the US, but not in Canada. What if one of our parents gave us a personal loan, and deposited that money into my Canadian bank account? Even though I am moving my tax home to the US, I will still be keeping some Canadian accounts. Do I technically have to report that somewhere?

It's not the gift tax that's an issue because they're Canadian and there is no gift tax here; but it's classed as income to you. If you keep it beyond the end of the tax year you have to pay income tax on it. You might want to talk to an accountant about this one because I'm sure it comes up quite often and I'm not as clued up on gifts classed as income in the US.

You have to report foreign bank accounts on the FinCEN FBAR form annually if the total value of the accounts is more than US$10,000.

[J-toronto]

So, does that mean that any money entering my Canadian account after the tax year (and after I've moved my tax home to the US) will be considered income that has to be reported and taxed in the US? Aside from possibly getting help on a down payment, I still have some of my own earnings that my family is holding for me, and am wondering what is the easiest, most hassle-free and low-cost way to obtain it...can they just write me a cheque that I deposit in my US account? If I leave it in Canada, it sounds like it will be taxed. Or would it be taxed anyway in the US? I'm a little confused about all this money transferring...

Would I be taxed on the Canadian funds when I report it on the FBAR?

Thank you, and sorry for all the questions. I'm trying to understand...

[Steven]

Capital transfers are not subject to tax, because it's already your capital. But any interest you earn on your Canadian bank account will be subject to US income taxes (just as it is to Canadian income taxes when your tax home is Canada). It's just more tricky to work out because you have to convert the amount on the NR4 into USD.

I'm not sure why you would want your parents to hold your money, there's no advantage to it. Just have them deposit it into your Canadian bank account, simple as that. You declare to the bank that you are non-resident for tax purposes.

If you receive a gift that's a different situation, usually it's treated as income and thus is subject to income taxes. It is a bit tricky because a gift by a US person to another is usually subject to gift tax in the US and you can deduct that. In this situation because it's from Canada to the US it will appear to be income.

Like I said, this is a bit of a tricky one, there may be methods to avoid the tax, you need to talk to the IRS or a cross-border accountant about it, the only one I'm familiar with is to repay it before the end of the tax year.

[agnelson]

US Gift tax is paid by the person GIVING the money, not the one receiving it.


So a Cdn giving money to a US person -- in any amount -- is not taxable by any jurisdiction. If the gift was large enough, it would be reported on Form 3520 (by the one receiving the gift), but under no circumstances would anyone owe tax on it.

A US person is limited to giving ~$11K per person (other than spouse) per year before the person GIVING the money will be assesed gift tax.

and resident aliens (even on non-immigrant status like h1 and TN) can avail themselves of the home buyers credit, if otherwise qualified