Thanks Dave!
One other question:
I found this on the IRS website: https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-compliance-tips. Is this applicable to me? Do they mean report the income lower but include the taxes paid in NZ? Thanks!
Foreign source qualified dividends and gains
If you receive foreign source qualified dividends and/or capital gains (including long-term capital gains, unrecaptured section 1250 gain, and/or section 1231 gains) that are taxed in the U.S. at a reduced tax rate, you must adjust the foreign source income that you report on Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), line 1a.
How do I make the adjustment?
- Form 1116 Instructions - See the detailed instructions for "Foreign Qualified Dividends and Capital Gains (Losses)."
- Generally, if the foreign source income is taxed at the 0% rate, then you must exclude the income from your foreign source income (Form 1116, line 1a).
- Generally, if the foreign source income is taxed at the 15% rate, then you must multiply that foreign sourced income by 0.4054 and include only that amount in your foreign source income on Form 1116, line 1a.
- Generally, if the foreign source income is taxed at the 20% rate, then you must multiply that foreign source income by 0.5405 and include only that amount in your foreign source income on Form 1116, line 1a.
- Generally, if the foreign source income is taxed at the 25% rate, then you must multiply that foreign source income by 0.6757 and include only that amount in your foreign source income on Form 1116, line 1a.
- Generally, if the foreign source income is taxed at the 28% rate, then you must multiply that foreign source income by 0.7568 and include only that amount in your foreign source income on Form 1116, line 1a.
- See Publication 514, Foreign Tax Credit for Individuals, for more information on the rate differential adjustment for the applicable year. Note: The above rate differential factors are taken from the 2023 Publication 514.
