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Israel is deducting taxes from the dividends I receive from a Israeli company. I should be able to get the taxes back. How?

The Israeli tax is 25%  so I do want the money back!
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3 Replies
JulieS
Expert Alumni

Israel is deducting taxes from the dividends I receive from a Israeli company. I should be able to get the taxes back. How?

You can take a foreign tax credit or deduction on your US tax return.

 

If your dividends are on a 1099-DIV or another US tax form, enter that form in your return before you start the Foreign Tax Credit section. 

 

If all of your foreign tax is on your 1099-DIV and your foreign tax is $300 or less ($600, if married filing jointly), you may not need to file Form 1116. 

 

If you need to file Form 1116:

  1. Select Federal on the left, then Deductions and Credits toward the upper center of the screen.
  2. Scroll down to Estimates and Other Taxes Paid, expand the section.
  3. Find Foreign Tax Credit, and click Start to the right.
  4. Click Continue, until you get to, Do You Want the Deduction or the Credit? select Take a credit.
  5. When you get to, No Other Income or Expenses, select Yes, if all of your foreign income was reported on forms you have already entered. Answer No, if you need to enter additional foreign income .
  6. When you get to, Choose the Income Type, select Passive.
  7. On Country Summary, click Add a Country (below the gray bar).
  8. Click Continue until you get to, Foreign Taxes Paid - Israel. 
  9. Complete this screen with your foreign tax information. 
  10. Continue until you get back to the country summary. 
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Israel is deducting taxes from the dividends I receive from a Israeli company. I should be able to get the taxes back. How?

Even if the FOREIGN TAX was deducted from an IRA?

ThomasM125
Expert Alumni

Israel is deducting taxes from the dividends I receive from a Israeli company. I should be able to get the taxes back. How?

The foreign tax may qualify for a foreign tax credit since it is based on income. However, you can only use the foreign tax credit to the extent you pay US tax on the foreign income. So, unless you have other foreign income on your tax return, the foreign tax credit would be suspended until a year when you had foreign income that was taxable on your US tax return. The IRA income would not be taxable until you took a distribution.

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