@Spino wrote:
[...]
4) You bring up the issue of tax treaties, but I believe this has a lot more to do with people who are resident internationally. I do not think it usually applies to passive income like this for non-residents (of foreign countries that have tax treaties [usually about how to treat residents in each others' countries.])
[...]
I'm running into a similar question. But, @Spino from looking at https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-t..., especially Example 1, which I think applies here:
Example 1: You received a $1,000 payment of interest from a Country A investment.
Country A’s withholding tax rate on interest income is 30% ($300), but you are eligible for a reduced treaty withholding rate of 15% ($150) if you provide a reduced withholding statement/certificate to the withholding agent. Your qualified foreign tax is limited to $150 based on your eligibility for the reduced treaty rate, even if $300 is actually withheld because you failed to provide the required withholding statement/certificate.
my understanding of that is that we would have to limit the amount of the credit if there's a treaty in place which limits the tax actually owed in order to reduce the double taxation. In my case, the country in question is Germany and there's a treaty which sets the rate at 15%, so I believe that would limit the amount of the credit.
For better or worse, though, the TurboTax version I'm on (online, Self Employed) seems to think otherwise. So I'll have to post that as a question
