I believe there is a defect with the way TurboTax 2024 and 2025 CANADA desktop version calculate the Foreign Income Tax paid (at least for the US) using form T2209 to determine the Canadian Federal Foreign Income Tax paid credit.
TurboTax seems to ignore the contributions made to a US Retirement plan for Canadian Commuters.
The formula should be (Net Non-Business Foreign Income/Total Net Non-Business Income) * Federal Tax Amount.
However, TurboTax is simply using the Canadian dollar value of the Non-Business Foreign Income value entered in the Foreign slip and is not subtracting the Canadian dollar value amount entered in a different location for the US Retirement Plan contributions.
In my case, because of this error, I was given 100% Credit for my Federal tax owned against my US Foreign Taxes paid when it should have only given me 97.88% This lead to nearly $900 missing in Canadian Taxes owed. Last year, the CRA caught it and I got penalties and interest, I just didn't entirely understand why. This year, I triple checked my return and noticed this was the root cause of the significant difference with other software.
I ended up manually editing the Foreign Worksheet by entering my 401k Contributions in the US Treaty field of that worksheet. That lead to my Non-Business Foreign Income being correct and only then did TT2025 align exactly to WealthSimple and to UFile calculations for all pertinent forms.
Heads up, if you use T2209 for US employment income with a US retirement plan for commuters to manually entered that amount in the Foreign Worksheet along with all the right retirement places in TT interview.
Hope this helps someone avoid the error.
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