My husband is a US citizen/Canadian resident. Is money from a US-based website foreign income? Can he deduct prototype costs?

 

Investors and rental owners

Yes. You should report the most types of foreign income on your Canadian income tax return.

Individuals resident in Canada are subject to Canadian income tax on their worldwide income, regardless of where it is earned or where it is received, and they are eligible for a potential credit or deduction for foreign taxes paid on income derived from foreign sources.

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