Canada taxes its residents on worldwide income, meaning every dollar you earn anywhere in the world is subject to Canadian tax. This guide explains how foreign income is reported, how double taxation is avoided, and how each common type of US income is treated. It is part of the international and cross-border tax guides; whether the rule applies to you depends on your residency status.
The basic rule: worldwide taxation
If you are a Canadian resident for tax purposes, you must report income from all sources, both inside and outside Canada:
| Income Type | Must Report? | Possible FTC? |
|---|---|---|
| Foreign employment income | Yes | Yes |
| Foreign business income | Yes | Yes |
| US dividends and interest | Yes | Yes |
| Foreign rental income | Yes | Yes |
| Foreign pension income | Yes | Yes |
| Capital gains on foreign property | Yes | Yes |
| Foreign inheritance | Generally no (not income) | N/A |
How a foreign pension is reported, and how treaties change the taxable amount, is covered in foreign pension income and Canadian taxes.
How double taxation is avoided
The foreign tax credit (FTC) prevents you from being taxed twice on the same income: you report the full foreign amount in Canadian dollars and claim a credit for the foreign tax paid, up to the Canadian tax on that income. The forms, the limit and how it works for each type of slip are explained in how to claim the foreign tax credit.
US income: special rules
The Canada-US Tax Treaty governs how income is taxed between the two countries.
US employment income
If you work in the US (or remotely for a US employer), that income is taxable in both countries. You file a US tax return (1040-NR) and claim the US tax paid as an FTC on your Canadian return. Visas, US residency tests and cross-border filing are covered in working in the US as a Canadian.
US dividends
US companies withhold 15% tax on dividends paid to Canadian investors (0% for RRSP accounts under the treaty). Report the gross dividend on your Canadian return and claim the FTC.
US social security
US Social Security benefits received by Canadian residents are 85% taxable in Canada. The US generally does not tax these benefits if you are a Canadian resident.
US rental income
Rental income from US property is taxable in both countries. File a US return to report the rental income, pay US tax, and claim the FTC on your Canadian return.
Form T1135: reporting foreign property
Reporting the income is separate from disclosing the property that earns it. Residents whose specified foreign property costs more than $100,000 CAD in total at any time in the year also file Form T1135, which covers what counts, the two reporting methods and the penalties.
Currency conversion
All foreign income must be reported in Canadian dollars. Use the Bank of Canada exchange rate for the date the income was received, or the average annual exchange rate if reporting aggregate amounts.
Common situations
Canadian working remotely for a US company
Your income is generally only taxable in Canada (where you perform the work). The US company may issue a W-8BEN form certifying you are a Canadian resident and not subject to US withholding.
Canadian with US rental property
File a US tax return (Form 1040-NR), report the rental income, deduct expenses, and pay US tax. Claim the US tax paid as an FTC on your Canadian return.
Canadian with a US brokerage account
Report all US investment income on your Canadian return and claim the FTC for any US withholding tax. A US account is specified foreign property for T1135 purposes.
Bottom line
Canadian residents are taxed on worldwide income, but the foreign tax credit system prevents true double taxation. The key is to report everything and claim the credits. Complex foreign affairs are where a cross-border tax specialist earns their fee. Our income tax calculator estimates Canadian tax on combined domestic and foreign income.
Correcting past years
Foreign income left off past returns can be corrected, and the penalties and how CRA finds out are covered in what happens if you don’t report foreign income. Amended returns for those years can go through CRA’s Voluntary Disclosures Program, explained in the CRA voluntary disclosure guide.