# American living in Canada - tax Qs regarding moving back to US



## rossbar (Jul 21, 2013)

Hi there, 

I am a U.S. citizen and have been living in Canada for a number of years. Over the past couple years, I have claimed the Foreign Earned income exclusion under the Physical Presence test one year, and the Bonafide Residence Test another year. 

I am considering moving back to the US, and am wondering how this will work with taxes. Currently, I have a large number of Unused Tuition credits in Canada so I haven't owed the Canadian gov. income tax on SE income, and I have gotten taxes paid on Employment income refunded. 

- My first question is whether it would make a different for tax purposes if I moved in the middle of the year vs. say on the 1st of January in terms of whether I would meet one of the requirements to exclude foreign earned income
- Could the foreign tax credit be applied to my Canadian Income ?

Any thoughts would be appreciated

thanks


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## Bevdeforges (Nov 16, 2007)

If you move mid-year, you have to pro-rate the FEIE for the period of time you are eligible for it. Simple example: if you move on July 1st, your available FEIE will be only half the full-year amount and that will apply only to income earned up to the date you move. (There's a place on the 2555 form to pro-rate them.)

Foreign tax credits are still available on any foreign income not covered by the FEIE.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

Moreover excess foreign tax credits can generally be applied to other tax years -- up to 1 year back and up to 10 years forward. That helps if, for example, you don't generate a lot of U.S. source income in the weeks and months after you move back to the U.S. but you do have some residual foreign source income with comparatively high foreign tax rates.

There are some advantages to getting some U.S. source earned income in this tax year versus (only) the next that I can think of. One example is that if you have U.S. source earned income you may qualify for additional refundable tax credits, notably the U.S. Earned Income Tax Credit (EITC). Another is that it's easier to make contributions to tax-advantaged retirement savings programs, notably the Roth IRA. If you have a non-U.S. citizen child then relocating to the U.S. likely means you can get child tax credits that you aren't getting now -- although moves from Mexico and Canada are exceptions. You probably will get a qualifying year of U.S. Social Security contributions in your Social Security earnings record, so you'll be that much closer to meet the 10 year contribution requirement to qualify for retirement benefits. You'll also get (or restore) U.S. Social Security disability and survivors' benefits that much more quickly.

In short, mid-year relocations can be beneficial, in both directions.


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## rossbar (Jul 21, 2013)

Thank you for your responses. Bev, I am curious how I could claim the FEIE once I was back in the states b/c it would seem that I wouldn't meet the requirements for the bonafide residence or physical presence test. I know that the physical presence test asks, "is your tax home in a foreign country?" Thoughts?


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## expatdiane (Aug 9, 2011)

Once you move back to the state, the foreign income exclusion stops…so if it is mid-year, you will only get half the credit. I believe the tax paid in the US on your Canadian income could generate a foreign tax credit in Canada.


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## Bevdeforges (Nov 16, 2007)

As Diane mentions, you can claim the FEIE up to the point where you move. You'll notice on the form 2555, there is a question regarding when your foreign residency began, and when it ended. You can claim the FEIE up to the date that your foreign residency ends as long as you meet the qualifications up to that date.

When you fill out the return, your tax home may no longer be outside the US - so you indicate that. And you apportion your FEIE appropriately.
Cheers,
Bev


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## rossbar (Jul 21, 2013)

Hey, thanks for your response...really appreciate it. So, I am thinking I will likely be moving back in early January of 2014 now. So, If I have my apartment and Canada through the end of December 2013, so it seems like I should be able to claim the FEIE for the whole 2013 year. I am confused by the bonafide residence test, b/c seeing as I have an apartment and job etc. in Canada it seems like I should meet that test, but of course I do have the intention to move back in 2014 so perhaps I don't qualify under it then after all. See where my confusion/concern is coming from? 

Thanks!


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