topic Can I get foreign tax credit for taxes paid on foreign stock dividends in an IRA? in Deductions & credits

Can I get foreign tax credit for taxes paid on foreign stock dividends in an IRA?

leochraska — Sat, 01 Jun 2019 15:39:47 GMT

No, you can only get a foreign tax credit for taxes paid...

AnnetteB — Sat, 01 Jun 2019 15:39:49 GMT

No, you can only get a foreign tax credit for taxes paid on income that is taxable on your Federal return.

Income earned (such as dividends) within your IRA account is not taxable on your personal return until you take a distribution from the IRA.

Even then, the distribution from the IRA does not retain the character of the earnings that were in the account. This means that if you took a distribution, then you cannot say that the distribution was due to the foreign stock dividends, and therefore you must claim the foreign tax credit.

Re: No, you can only get a foreign tax credit for taxes paid...

stevenkay54 — Sun, 28 Jun 2020 17:42:15 GMT

Your answer confuses me. You say if you are taking distributions from an IRA that paid foreign taxes you must take a credit. Well that sounds like if an IRA paid foreign taxes and if you take a withdrawal from the IRA you CAN claim the foreign taxes paid as a credit. Well a credit is what most people would take anyway. I'm confused.

Re: Can I get foreign tax credit for taxes paid on foreign stock dividends in an IRA?

RobertG — Sun, 28 Jun 2020 19:55:38 GMT

You can only get a foreign tax credit for taxes paid on income that is taxable on your return, and only in the year you paid the taxes.

So, you can't get a foreign tax credit for taxes paid on foreign stock dividends in an IRA.

Re: No, you can only get a foreign tax credit for taxes paid...

mjs1952x — Wed, 28 Oct 2020 15:05:50 GMT

If I take a $2,000 taxable distribution from my (non Roth) IRA can I take the total foreign taxes paid of $150 from 1099 as a credit on 1040?

Re: No, you can only get a foreign tax credit for taxes paid...

Anonymous — Wed, 28 Oct 2020 18:07:27 GMT

since you are saying the $150 was withheld on your foreign retirement income, you have to use form 1116 to figure the allowable credit. the category is general unless it was a lump-sum distribution then it's that category.

I may not be understanding the source of the FTC withholding and what you have to do depends on the type of income for which the FTC was withheld.

Re: No, you can only get a foreign tax credit for taxes paid...

dmertz — Thu, 29 Oct 2020 23:42:28 GMT

"If I take a $2,000 taxable distribution from my (non Roth) IRA can I take the total foreign taxes paid of $150 from 1099 as a credit on 1040?"

If you are referring to foreign taxes paid by your IRA, no, you can't take as a credit on your individual tax return the foreign taxes paid. The only way that foreign taxes paid by your IRA could be taken as a credit would be on line 46a of the IRA's Form 990-T if the IRA was required to file that form because the IRA had a sufficient amount of Unrelated Business Taxable Income (UBTI).