1022 / Does a U.S. citizen living in Canada need to be concerned with the net investment income tax (NIIT), or “Medicare Tax,” and if so, is there tax relief available?

U.S. citizens living in Canada have many considerations that should be taken into account, only some of which are discussed here. In addition to the filing requirements already outlined above, U.S. citizens should be aware of the Net Investment Income Tax, or “Medicare Tax” as it has become colloquially known. U.S. citizens who historically have not had any U.S. income tax liability may be subject to this new tax at a rate of 3.8 percent if they have ‘net investment income’ (generally investment income such as interest, dividends, capital gains, etc. less permitted expenses related to that income such as brokerage fees and interest expenses) and they have a modified adjusted gross income over $200,000 if single, or $250,000 and filing jointly, Unfortunately for U.S. citizens subject to this tax, it seems unlikely that foreign tax credits can be used to reduce or eliminate this tax liability as the net investment income tax is not imposed by Chapter 1 of the U.S. Code and foreign tax credits are only applied as against Chapter 1 taxes.