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I own a place in the US but currently live in Montreal. The entire year I rented my place out in the US. Lets say I have $17,000 in income from the US from income.

On my US taxes I have no other income outside of foreign income from my job in Canada. Using Turbo Tax it determined that my net income from rentals is -7000 dollars, due to depreciation of my home as well as deductions from taxes, repair, etc. The rest of my foreign income is all excluded since I pay taxes in Canada. Net result is I owe $0 to the US.

My Canadian taxes are proving to be more tricky. First off, Turbo Tax Canada software is just broken for this stuff so I gave up on it and went to H&R Block Online's software. It's a lot more straight forward. It's handled me filing a T1135 Foreign Income Verification Statement, which is since I own property > $100,000. Through it I've also filled out a T776 - Rental Income Property. In there it tells me that my net income is $9000 (down from the actual $17000 amount due to taxes, fees, repairs, etc).

Where I am getting stuck is this part. It has a form which is used to calculated foreign tax credit. It asks me for Gross foreign income ($17000), Net foreign income or loss (-7000), amount of foreign tax paid ($0), and income exempt under a tax treaty ($17000). There is an option below that that I'm not using that says Limit of foreign tax credit and deduction (T2209) and mentions that this is for claiming a lesser amount.

Those are the values I am currently using. But I'm not sure if that is correct. Canada basically only recognizes $9000 in net rental income, so should the income exempt under tax treaty only be $9000 or the $17000? Or is no rental income from the US exempt under treaty? This is basically the only part of my taxes I don't know how to do 100%.
 
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