You will not be subject to the foreign tax credit limit and will be able to claim the foreign tax credit without using Form 1116 if the following requirements are met.
- Your only foreign source gross income for the tax year is passive income, as defined in Publication 514 under Separate Limit Income.
- Your qualified foreign taxes for the tax year are not more than $300 ($600 if filing a joint return).
- All of your gross foreign income and the foreign taxes are reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT).
- You elect this procedure for the tax year.
If you make this election, you cannot carry back or carry over any unused foreign tax to or from this tax year.
Caution! This election exempts you only from the limit figured on Form 1116, not from the other requirements described in Publication 514. For example, the election does not exempt you from the requirement that the foreign tax be a nonrefundable income tax.
For further details on computing the foreign tax credit refer to Publication 514, Foreign Tax Credit for Individuals
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