Newcomer's T1 - Should it include US income as well?

My client is a newcomer who landed in Canada in April 2018 and been in Canada since then. Prior to that he was in US.  While filing 2018 T1 for him, do I need to show his US income and related taxes as well?

Answer

If you have determined your client became resident April 1/18, your client's T1 must show his income from all sources world-wide ftrom April 1 - Dec 31 as well as his Canadian-source income from Jan 1 - March 31.    That is what is taxable in Canada. 

However, when you enter a date of entry under residency, some more boxes open up in which you enter the Canadian source income Jan 1 - March 31 as well as his foreign source income for the same period.  This is because a resident's total income for the calendar year from ALL sources worldwide is used to determine his eligibility for benefits such as GST and the Canada Child Benefit (not to mention various provincial programs).  Obviously, it would be unfair if an immigrant who had good earnings before arriving in Canada but not much while resident got way more in Canadian benefits than a person resident in Canada for the whole year who had the same or less income for the year.

You will note a question about pro-rating non-refundable tax credits.  Generally, the non-refundables are pro-rated according to the number of days the person was resident in Canada.  However, if the Canadian-source income reported on the return for the non-residence period is 90% or more of the net world income for that time, then the person gets the full non-refundables with no pro-rate.  This means that someone who has no income before coming to Canada will meet the 90% requirement and thus be entitled to full tax credits.

Jo H Ruelle  CPB

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