RalphH1
Expert Alumni

Deductions & credits

Reducing your self-employment tax by including it on Schedule C would be nice, but unfortunately they don’t let you deduct income taxes (including foreign ones) that way. (See the Schedule C instructions here.) You can approximately avoid being double-taxed on the $6k though, by using the “Foreign Tax Credit” (described by the IRS in this article).

 

Here’s a TurboTax support answer about where to go in our program to enter this. It can be slightly tricky, and there are frequently several questions which don’t apply to a simple scenario. When you’re done and print your return, you’ll see a Form 1116 result which carries to Schedule 1 (line 1), and then to your 1040 (on line 20), where it’s subtracted from your total tax.

 

Note that the credit may or may not be the $675 amount you actually paid to Canada. (It’s the smaller of either the actual amount paid, or what the U.S. tax would be on that amount of income. So if your rate in Canada was higher than the U.S. rate, it will be reduced.)

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