Since I have one stock I own which is traded in Germany, it pays dividends to me from which a total of 26.375% are withheld for German taxes.
I entered the amounts from the 1099-DIV that the broker issued to me, including that 26.375% that was withheld (which appears in Box 7). So, TurboTax put that amount in for my foreign tax credit.
However, if I understand https://www.irs.gov/individuals/international-taxpayers/foreign-taxes-that-qualify-for-the-foreign-t... correctly, especially this example:
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. |
Doesn't that imply that I would only be eligible for a credit on 15%, not the full 26.375%? Germany has a tax treaty with the U.S. which sets the refundable amount at 15%. I could submit such a withholding certificate, but the IRS charges around $85 I think for the privilege, which would more than wipe out that 11.375% that I might recover from the German government, so I don't plan to do that
I also noticed that TurboTax doesn't seem to allow me to input a value from Box 8 on 1099-DIV, which I think may be related. Box 8 on my form tells which country withheld the tax. I think if TurboTax understood it was Germany, they might know about the 15% treaty level and they might adjust the amount of my credit
