pk
Level 15
Level 15

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