- Mark as New
- Bookmark
- Subscribe
- Subscribe to RSS Feed
- Permalink
- Report Inappropriate Content
Deductions & credits
@mhyong , agreeing with comments by my colleague @Mike9241 , regarding the safe harbor amounts of FTC, I want to make sure that
(a) after entering all the amount(s) from form 1099-DIV including the foreign taxes paid and country, you confirmed that the 1099-div information is correctly entered . --- think there is summary sheet that tell you that
(b) when all the incomes have been entered, then you selected the Credit and Deductions tab.
(c) when you other deductions have been entered and even if TurboTax has selected the standard deduction, you still have to go down the list of deductions/ credits till you get to select " Foreign Tax and credits. Here is where you have to make sure that you select that you want credit ---- this will allow you to choose credit / deduction etc.
As mentioned by @Mike9241 , the safe harbor amount is US$300 per filer ( thus US$600 for a joint return).
Note that ---- 1. Deduction of foreign taxes is on schedule-A ( Itemized deduction only ) under State & Local Taxes i.e. a total of US10,000. 2. Foreign tax credit is limited on form 1116 by a ratio of foreign income world income and thus while it recognizes taxes paid dollar for dollar, the amount allowed is at most a fraction and no more than the tax US has imposed on the same income --- double taxation mitigation.
Sometimes it is better ( especially in cases where the total Foreign Taxes Paid is around the safe harbor amount and you have significant US compared to Foreign income) to reduce the claimed foreign taxes amount to match the safe harbor amount -- your final tax liability would be more benign.
Does this help ?
pk