I have a foreign bank account on which I have some profit from a certificate of investments. The foreign government is taking 10% profit on it.
1. How will I report this profit?
2. Is there any tax disadvantage of investing in such a product.
1. Report the profit in the corresponding area of the tax return. Interest, dividends, stock sales, etc whatever matches your investment profit is where you report the profit.
If qualified, you may be able to deduct the foreign tax paid on form 1116.See Where do I enter the foreign tax credit (Form 1116) or deduction?
2.The tax paid to the foreign government may be higher than your US tax. If so, that is a disadvantage as the US allows a credit equal to the lower of the tax rates. For full details, see Instructions for Form 1116. All provided you qualify, see pages 2 & 3.
1. Report the profit in the corresponding area of the tax return. Interest, dividends, stock sales, etc whatever matches your investment profit is where you report the profit.
If qualified, you may be able to deduct the foreign tax paid on form 1116.See Where do I enter the foreign tax credit (Form 1116) or deduction?
2.The tax paid to the foreign government may be higher than your US tax. If so, that is a disadvantage as the US allows a credit equal to the lower of the tax rates. For full details, see Instructions for Form 1116. All provided you qualify, see pages 2 & 3.
Hi AmyC,
I live in state of Georgia. Do I have to pay state income tax on it as well?
Yes, as a resident of GA, you report all income received while a resident.