A pair of U.S. tax cases decided this week confirmed that high-income U.S. citizens living in Canada (including dual citizens) could face an effective marginal tax rate of more than 57 per cent on any investment income they earn. Both cases dealt with the ability of U.S. citizens to claim a foreign tax credit against the dreaded net investment income tax (NIIT). One of the cases involved a Canadian resident taxpayer.
Before delving into the details of these landmark decisions, a bit of background on U.S. tax law is in order. The NIIT took effect in 2013 under the Affordable Care Act, known informally as Obamacare. The NIIT applies to high-income U.S. tax filers making more than US$200,000 (for single filers) annually, and imposes ...
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