Residents of Canada who work in the U.S. (commonly referred to as “commuters”), and who are members of a qualifying retirement plan in the U.S. can deduct their contributions to that plan on their Canadian income tax and benefit return, as long they meet certain conditions and respect certain limits.
The maximum amount that can be deducted by a taxpayer for a given year is the contributions he/she made in the year and that are attributable to the work performed in the year. This maximum is further limited to the RRSP deduction limit for the year after reducing that limit by any RRSP/PRPP contributions deducted for the year.
The qualifying retirement plan contributions deducted for the year also reduce the unused RRSP deduction room at the end of the year. The unused deduction room is carried forward and is taken into account when determining the following years’ RRSP deduction limit.
If the taxpayer contributed to a foreign employer-sponsored pension plan or to a Social Security Arrangement (other than a United States (U.S.) Arrangement), complete Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement – Non-United States Plans or Arrangements. If the taxpayer was a U.S. resident working in Canada and he/she contributed to a U.S. employer-sponsored retirement plan, complete Form RC267, Employee Contributions to a United States Retirement Plan – Temporary Assignments. If the taxpayer was a commuter from Canada and he/she contributed to a U.S. retirement plan, complete Form RC268, Employee Contributions to a United States Retirement Plan – Cross-Border Commuters.
For more details, consult the Article XVIII of the Canada-U.S. Tax Convention at http://www.fin.gc.ca/treaties-conventions/unitedstates-etatunis-eng.asp.
If you are claiming a foreign tax credit for foreign employment income and you completed Form RC267, RC268 or RC269 in connection with this job, make sure to select the country name. This allows the program to calculate the foreign employment income correctly on Form T2209 C, Federal Foreign Tax Credits – per country (Jump Code: 2209 C).
You can enter, in Forms RC267, RC268 and RC269, the Canadian portion of the deduction that should not be taken into account in the foreign tax credit calculation. To do so, enter the amount on the line to that effect in Form RC267, RC268 or RC269, as applicable.
This way, Taxprep will automatically transfer to Form T2209 C the registered pension plan deduction that should be taken into account in the foreign tax credit calculation.