Small amount foreign tax credit without Form 1116

user125562 · ‎February 18, 2026

I received $29 Nintendo ADR with $4.4 foreign tax withheld reported on 1099-DIV. That's my only foreign income. Based on the US-Japan treaty, Portfolio Dividends (Individual Shareholders) is typically subject to a 15% reduced tax rate. I believe that's the rate applied to my foreign tax withheld.

One of the conditions to claim foreign tax credit without filing form 1116 is

All of your foreign taxes were: Legally owed and not eligible for a refund or reduced tax rate under a tax treaty

I'm a bit confused with this condition, which of the following two is right?

- I'm already paying the 15% and there is no other treaty to further reduce the rate, so I meet the requirement and I don't need to file form 1116 or

- The 15% rate I'm paying is a reduced rate because of the treaty, so I have to file form 1116 in order to claim the credit

If I cannot claim the credit without form 1116, can I just completely give it up and enter 0 for foreign tax withheld when entering 1099-DIV as I don't want to spend time on form 1116 for $4?

Thanks

pk

@user125562 ,

(a) Looking at US-Japan tax treaty of 2003, article 10 generally allows US recipient of dividends from a Japan entity to be taxed to be taxed by US ( in addition to Japan at its own rate ) but limits it to 10% ( for individuals and with a few restrictions as to volume of ownership etc. ). That is the maximum rate -- does not say anything about less than that.

(b) Each of the contracting states always have the option of taxing a resident/ taxpayer as if the treaty was not in existence.

(c) As you say Japan has taxed this dividend income at 15%

Thus I see no reason for you not to use the safe harbor ( i.e. without using the form 1116 and its limitations ).

Equally , while there is a requirement to report each and every earning amount, there is no requirement to report/ claim any taxes paid on that income to another taxing authority. Some may disagree with me but I stand by that.

That is my opinion on all of the above.

Is there more I can do for you ?