It depends on your assumption of Foreign Qualified Dividends. To be considered a "Qualified Foreign Dividend" for the Foreign Tax Credit (Form 1116), the underlying foreign corporation must meet specific IRS criteria. This usually means:
- The corporation is incorporated in a US possession, OR
- The corporation is eligible for benefits under a comprehensive US income tax treaty, OR
- The stock is readily tradable on an established US securities market (like an ADR).
If your ETF focuses on emerging markets or countries without tax treaties, those dividends may count as “Qualified” on your Form 1040 and get capital gains rates—but might not qualify for the adjustment on Form 1116. If the ETF sponsor reports $0.00, it usually means the underlying investments didn’t meet the “treaty-benefit” requirements for the foreign tax credit.
It may seem like you’re missing out on a tax benefit, but here’s how tax reporting works. The IRS gets the same 1099 and data that you do. If you enter anything other than $0.00 for foreign qualified dividends, your Form 1116 won’t match what your broker sends. This often leads to automatic IRS notices. Since the ETF company lists $0.00 on their website, they’ve likely already reviewed their holdings and found that none qualify for that category.
To summarize, report $0.00 of foreign qualified dividends based on the information in the supplemental section and on the website. Don't make any adjustments without a corrected supplemental disclosure statement from your broker.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
