Court Case Update: U.S. Citizens with Canadian Income Get A Foreign Tax Credit Against the NIIT!
Photo by Jason Gillman: Lighthouse On a Frozen Lake in Michigan. The Net Investment Income Tax (NIIT) introduced under the Affordable Care Act of 2013, imposes a 3.8% tax on investment income for individuals with adjusted gross incomes exceeding $200,000 (single) or $250,000 (joint). This tax applies to income such as capital gains, dividends, interest, rents, and royalties, as well as income from passive business activities from sources both within and outside the United States. This tax has been contested many times by US tax residents, US Citizens, and Green Card holders. Those who live outside the United States and have to pay this tax find it especially burdensome. Court Case: Bruyea v. United States In a landmark decision on December 5, 2024, the U.S. Court of Federal Claims ruled in favor of a dual Canadian-U.S. citizen, allowing a treaty-based foreign tax credit (FTC) to be applied against the Net Investment Income Tax (NIIT). This ruling, stemming from the case Bruyea v. Unite...
