Answers · Moving, Residency and Departure
How do I report foreign income on a Canadian tax return?
Canadian residents report worldwide income, so every foreign amount goes on the T1 in Canadian dollars at the gross figure before any foreign tax was withheld. Each type of income has its own line: foreign wages on line 10400, foreign pensions on line 11500, foreign interest and dividends on line 12100, and foreign rent and capital gains on the usual forms. You then claim a credit for the foreign tax on Form T2209, and if your foreign property cost more than $100,000 at any point in the year, you also file Form T1135.
By the AnalytIQ Accounting team · Last reviewed: September 6, 2026
Start with the rule: worldwide income, in Canadian dollars, gross
A Canadian tax resident is taxed on income from every country, and the T1 has no separate schedule for foreign amounts. You report them on the same lines as Canadian income of the same kind, converted to Canadian dollars. Three habits keep this right:
- Report the gross amount. If a US payer sent you US$850 after withholding US$150, the income is US$1,000. The US$150 is claimed separately as a foreign tax credit, not netted off.
- Use a Bank of Canada rate. The CRA accepts the exchange rate on the day the income was received or, for amounts that arrive throughout the year such as salary or monthly pension, the Bank of Canada annual average rate. Capital gains use the rate on the purchase date for cost and the sale date for proceeds, which means part of every foreign gain or loss is currency movement.
- Keep the source document. A W-2, 1099, 1042-S or foreign pension statement is your evidence for both the income and the tax withheld, and the CRA routinely asks for it before allowing a credit.
Canada does not care that the money never left the foreign account. Interest earned in a US savings account you have not touched since university is still reportable every year.
Which line each kind of foreign income goes on
The T1 lines that matter, with the most common US slips mapped to each:
| Type of foreign income | Typical US slip | Where it goes on the T1 |
|---|---|---|
| Employment income | W-2 | Line 10400, other employment income |
| Pension, IRA or 401(k) withdrawals | 1099-R | Line 11500, other pensions and superannuation |
| US Social Security | SSA-1099 | Line 11500 in full, with a 15% deduction on line 25600 |
| Interest and dividends | 1099-INT, 1099-DIV, 1042-S | Line 12100, interest and other investment income |
| Sales of stocks or property | 1099-B, closing statement | Schedule 3, capital gains, with cost and proceeds each converted on their own date |
| Rental income | 1042-S or property manager statement | Form T776, net amount to line 12600 |
| Self-employment and contractor income | 1099-NEC, 1099-K | Form T2125, business income |
Two of these lines hide traps. Foreign dividends go on line 12100 and do not qualify for the Canadian dividend tax credit, so US dividends are taxed like interest. And the W-2 box 1 figure is a starting point, not the answer: pre-tax items such as 401(k) deferrals are excluded from box 1 but may need separate treatment on the Canadian return, so keep the full slip rather than a summary.
The 1042-S is the slip most people cannot place. It is what a US payer issues to a non-US person, and box 7 shows the US tax withheld, which is the number you need for the credit. We explain it in what is a 1042-S and what do I do with it, and the rate question for rental owners in which exchange rate to use for US rental income.
How to avoid paying tax twice: Form T2209 and its limits
Reporting the gross income would double-tax you without the foreign tax credit. Form T2209 calculates a federal credit for foreign income tax paid, and Form T2036 carries any remainder to the Ontario return. Both are limited to the Canadian tax that applies to the same foreign income, so if the foreign country taxed you more heavily than Canada does, the difference is not refunded. On investment income, foreign tax above 15% is instead deductible from income under section 20(11).
US payroll taxes for Social Security and Medicare count as foreign income tax for this purpose, which is a meaningful credit for commuters. Foreign tax that exceeded the treaty rate does not count: if a US broker withheld 30% on dividends because you never filed a W-8BEN, Canada credits only the 15% treaty rate and the rest has to be recovered from the IRS. The full mechanics, including the business and non-business baskets, are in how the foreign tax credit works in Canada.
The form that reports the assets, not the income
Form T1135, the Foreign Income Verification Statement, is a separate filing that lists your foreign property when its total cost exceeded $100,000 Canadian at any time in the year. It covers foreign bank accounts, US brokerage accounts, US stocks held anywhere outside a registered plan, foreign rental property and debts owed to you by non-residents. It does not include personal-use property such as a Florida condo you never rent, or anything inside an RRSP, TFSA or RESP. The penalty for missing it starts at $25 a day, and the CRA can reassess more years when it is missing, so it belongs on the same checklist as the income lines. Our T1135 guide covers the thresholds and the simplified method for holdings under $250,000.
How we prepare returns with foreign income
We build a source list before we touch the return: every foreign account, slip and property, with the currency and the rate applied to each. From there the income maps to the lines above, the withholding to Form T2209 with the supporting slips attached, and the assets to the T1135. Where the foreign tax has not been finalized, we hold the credit until the US return is filed so the two agree. This is the routine work of our cross-border tax services, and the pre-season version is in our checklist for Canadians with US income.
Source: CRA — Form T2209, Federal Foreign Tax Credits; CRA — Form T1135, Foreign Income Verification Statement.
Rules at a glance · Moving, Residency and Departure
Not sure which applies to you? Get a free proposal or book 15 minutes.
What we take off your plate
Cross-border tax for people moving to or from Canada, handled.
- Departure-year return filed with the T1161, T1243 and treaty tie-break
- TFSA, RRSP and 401(k) or IRA moves sequenced before you cross the border
- Canadian and US returns prepared by one team
- Treaty positions and foreign tax credits lined up
- FBAR and T1135 foreign reporting
- ITIN applications certified in-house
Mistakes we fix
Three things that go wrong for people moving to or from Canada.
- Treating the 60-month rule as covering everything owned, not just pre-arrival property
- Contributing to a TFSA after becoming a US resident and triggering the 1% monthly penalty
- Skipping the section 216 election and leaving 25% withheld on gross rent instead of net income
Recognise one? Book a call and we will tell you what it is costing you.
How we can help · Moving, Residency and Departure
Where we do the work.
Fixed fees, quoted after a short discovery call. Canadian and US filings under one roof.
Free proposal
A fixed fee for your cross-border tax work, in writing.
- Tell us about your business. The form takes about a minute.
- A short discovery call. Fifteen minutes to confirm what you need.
- A fixed fee in writing. We reply within one business day. No hourly surprises.
- Canadian and US filings under one roof
- Cloud-first: QuickBooks Online, Dext, Wagepoint
- Brampton, Ontario, with clients across Canada and the US
Related questions.
Do I have to report foreign income if it was already taxed in the other country?
Yes. Canadian residents report worldwide income regardless of where it was taxed. The foreign tax is claimed as a credit on Form T2209 so the same dollar is not taxed twice, up to the amount of Canadian tax on that income.
Which exchange rate should I use for foreign income?
The Bank of Canada rate on the day you received the income, or the annual average rate for income received steadily through the year. Capital gains use the rates on the purchase and sale dates separately.
Do I report foreign income if it is under $100,000?
Yes. The $100,000 figure is the cost threshold for the T1135 asset report, not an income exemption. All foreign income is reportable from the first dollar.
Related reading
Still have questions?
Foreign slips and not sure where they go.
A short discovery call gets you a specific answer and a fixed quote, with no hourly meter.