Filing taxes for retired (in India) parents living in US as permanent residents

[Anonymous]

My parents got their Green Card/Permanent Residency recently. My dad worked in India and retired. He is filing taxes in India for his retirement income. He has to file his taxes in the US starting this year for health insurance tax credits. I would like to know how to file the taxes here? He is already paying his taxes in India, so paying here might come under double taxation. Also, his retirement income is under $11K. I appreciate any advice on how to approach this and the steps involved?

[DeanM15]

As your parents have their Green Card, they can file the Form 1040 with TurboTax and not the Form 1040NR.

Unlike most countries, the US taxes worldwide income. This means the US taxes income no matter where it is earned. Assuming that your parents are living in this county, they can take the Foreign Tax Credit. The Foreign Tax Credit can be claimed for tax paid to a foreign country on income that is also taxed by the United States. The Credit is the lesser of foreign tax paid or the US tax allocated to the foreign source income. 

To find the Foreign Tax Credit, follow these instructions:

Both the credit and the deduction are entered in the same place. Here's what you do:

1. Make sure you've entered all your foreign income.
2. From within your return, search for foreign tax credit and select the Jump to link in the search results.
3. Answer Yes to Did you pay foreign taxes in 2019 or have credits to use from a prior year?
4. Follow the instructions to get the credit or deduction.

In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section.

[Anonymous]

Thank you. If India has a treaty with US on double taxation, do my parents still have to file taxes here in US and use the foreign tax credit?

They are applying for ACA federal tax credit, so I want to make sure they file it right.

[MarilynG1 · Accepted solution]

Yes, in order to get a Premium Tax Credit (PTC) they would need to file a US tax return, and use the Foreign Tax Credit for the tax paid in India on their retirement income.

After they have entered their income into TurboTax, they enter their Form 1095-A into their return   Type '1095a' in the Search area, then 'Jump to 1095a' to get to the entry.

This allows the calculation of any PTC refunded (or owed), based on their income and premium amounts they paid as shown on Form 1095-A.  

The results will be displayed in TurboTax in this section, and are shown on Form 8962 in the completed return.

Click the link for more detailed info about the Premium Tax Credit (PTC).