Foreign Tax Credit

Forum|Forum|1 year ago
July 30, 2024
1 reply
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I live abroad in a country with a double taxation agreement. All of my income is US sourced, but also taxed in my country of residence. How do I claim these taxes paid as a Foreign Tax Credit using turbotax?

DoninGA

Level 15

To enter Foreign taxes paid -

Click on Federal Taxes (Personal using Home and Business)
Click on Deductions and Credits
Click on I'll choose what I work on (if shown)
Scroll down to Estimates and Other Taxes Paid
On Foreign Taxes, click on the start or update button

Or enter foreign tax credit in the Search box located in the upper right of the online program screen. Click on Jump to foreign tax credit

kperlman01Author

Level 2

This doesn't seem to work. It seems be be only for taxes paid on foreign sourced income (FSI). When I select that I have not received any FSI, it says that I am not eligible for the Foreign Tax Credit. I also tried to select the option to itemize my foreign tax deductions, but that didn't work either. To be clear, all of my income is US based, but I live in a country that has a double taxation agreement, and taxes paid here are a credit against my US taxes. Maybe Turbotax doesn't support this situation?

pk_

Level 15

@kperlman01 , agreeing with both my colleague @DoninGA and with you on your observations.

(a) While you are at the Foreign Tax Credit screen -- select / yes and select credit for foreign taxes paid.

(b) When its for "Category" of Foreign Source income ( at the top of the form 1116 , if you are using one to follow along ) , select " Resourced by Treaty " -- do not select any other category box.

(d) Enter the Taxes paid ( levied by) the foreign Taxing authority.

Note that while the US does recognize all the foreign taxes paid, the allowable amount for the tax year is limited to lesser of (a) actual amount paid OR (b) allocated amount of US taxes based on the ratio of Foreign Source income to World income.

Also note because your resourcing is for the express of double taxation mitigation, there is no need to file a form 8833 along with your return.

Does this make sense ? Is there more one of us can do for you ?