Yes, the foreign income and foreign tax information applies to TurboTax Deluxe as well. U.S. citizens and resident aliens must report the income they earn outside of the U.S. annually. There are, however, certain credits and exclusions you can apply to significantly reduce or eliminate your owed taxes. To avoid double taxation on Americans living abroad, the IRS gives them a choice:
- Deduct their foreign taxes on Schedule A, like other common deductions.
- Use Form 1116 to claim the Foreign Tax Credit (FTC) and subtract the taxes they paid to another country from whatever they owe the IRS.
- Use Form 2555 to claim the Foreign Earned-Income Exclusion (FEIE), which allows those who qualify to exclude some or all of their foreign-earned income from their U.S. taxes.
In most cases, choosing the FTC will reduce your U.S. tax liability the most. Most of the time, if you paid less than $300 ($600 if married filing jointly) in total foreign taxes, you don't even need to complete Form 1116 to get the credit. Election To Claim the Foreign Tax Credit Without Filing Form 1116
Federal Individual Form Availability
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