Foreign tax credit for 1099-Div

Forum|Forum|3 months ago
April 3, 2026
2 replies
215 views

I am filing MFJ using turbo tax 2025 premier windows software. I have a 1099-Div from my employer with $2585 dividends and $905 foreign tax paid to Switzerland (where my employer is based). In the past years, my foreign tax paid was less than $600 and I was able to get a full tax credit for the tax paid to Switzerland. For example, last year was $555 foreign tax paid to Switzerland and I got full tax credit on my US return. This year, turbo tax walked me through a bunch of AMT related questions (e.g. first year you are eligible to make the simplified foreign tax limitation election for AMT purposes) and ended up with only $386 in foreign tax credit. Why is that? Reading some other Q&A, since the foreign tax paid is greater than $600, I have to file Form 1116. What can I do here to maximize my foreign tax credit?
Thanks!

DaveF1006

Level 15

The IRS will not give you a credit for foreign taxes that are higher than what the U.S. would have charged you on that same money.

If the U.S. tax rate on your dividends is 15%, but Switzerland charged you 35%, the IRS says: "We will only cover the first 15% to prevent double taxation. The extra 20% is between you and Switzerland."
On your $2,585 in dividends, a 15% U.S. tax rate equals roughly $388. This matches almost exactly the $386 credit TurboTax gave you.
In fact, the U.S. has a tax treaty with Switzerland that says U.S. residents should only be charged 15% on dividends.

All is not lost, however. The remainder of your Foreign Tax Credit can be carried back one year and then carried forward for the next ten years to apply to any foreign income you may expect. Also, you may file paperwork with the Swiss government to get back the portion they withheld above the 15% treaty rate.

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dhurandharAuthor

Level 2

Thanks, Dave! How do I carry it back one year? Do I need to amend my 2024 return then? I got $555 foreign tax credit. So technically, I could claim another $45 and still be within $600. But if this requires complicated paperwork, then may not be worth the effort.. Thanks again!

DaveF1006

Level 15

Yes, you will need to amend your 2024 return to carry it back one year.

@dhurandhar

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pk_

Level 15

@dhurandhar , Namasteji

Yes, form 1116 while recognizing the full amount of Foreign Taxes paid, computes the allowable FT as the lesser of actual paid AND that imposed by US on the same doubly taxed foreign income. Note that the allocation of US taxes on this doubly taxed income is based on complicated but standard process. The rest, i..e unallowed is available for carry back one year or forward for usage later ( with foreign source income ).

While others have/ may disagree with me, there is no requirement for you to declare any/ full amount of Foreign Tax Paid. Under the perjury jurat, a lower amount claimed is still true. Thus , in my personal view ( and absent any case law and/or statute language to the contrary), I am quite comfortable declaring a lower amount of Foreign Tax paid, if that is of benefit to me. But you are right in that I am splitting hairs here. I caution you though that it is your , and your alone, choice.

Is there more I can do for you ?

Namaste Dhurandar ji ( that is not your real name is it ?)

dhurandharAuthor

Level 2

Thanks, pk, for the quick response!
Dhurandhar is not my real name 🙂

So if I understand you correctly, my options are:
1) Take the $386 tax credit and carry the remaining ($905 - 386 = $519) to the next year. Is there anything I need to do now to ensure that turbo tax tracks this for the following year?
2) Declare $600 foreign income source (MFJ) and claim that full tax credit. Forget the remaining amount. But there is some risk involved with this option.

Thanks again!

pk_

Level 15

@dhurandhar that is correct. The carry ( forward/backward) option is available ONLY when form 1116 is used and use thereof is quite iffy -- more of an asymptotic recovery at best.

Namaste ji