topic FORM 1116 in Investors & landlords

FORM 1116

Sam Hopi — Wed, 11 Feb 2026 03:31:21 GMT

Hi, my question is if I paid my rental income tax to England on 02/28/2024 , also I have a income in the U.S. and want to file form 1116; I want to know in Part II of 1116 what box should I mark Paid or Accrued?

and what is date?

Thanks for your help!

Re: FORM 1116

DianeW777 — Wed, 14 Feb 2024 22:05:40 GMT

It's important if you made a selection in the past. If you chose 'Accrued' in the past you must continue to use that method.

If you report on the cash basis, you can choose to take the credit for accrued taxes by checking the “Accrued” box in Part II on a timely filed original return. You can’t make this choice on an amended return. Once you choose to do this, you must credit foreign taxes in the year they accrue on all future returns.
- Form 1116 Instructions
The date is dependent on whether you are using the paid date or the accrued date. Based on your statement, the payment is 2024, however they would have been accrued possibly earlier than that, so you must decide whether you are going to use accrued or paid.

Re: FORM 1116

pk — Wed, 14 Feb 2024 23:45:50 GMT

@Sam Hopi generally agreeing with my colleague @DianeW777 , and being cognizant of the tax year differences between US ( calendar year ) and UK (April 1st to March 31st of following year ),

(a) you need to allocate the gross rental income and taxes paid to Calendar year

(b) generally you should use the "paid" and use the date as 12/31/XX --that is the easiest way to be compliant and homologated for the US tax year.

I am not sure if this satisfies your query -- please consider providing more details so one can provide an answer more attuned to your specific situation ( facts and circumstances ).

Will await your answer and then will circle back .

Re: FORM 1116

Sam Hopi — Sat, 17 Feb 2024 17:24:13 GMT

Hi, What does mean accrued method for this rental income, also I paid 2023 tax of England on 02/28/2024

for $485 So, I am confused , I can choose accrual or I can choose cash, your answer is :::If you report on the cash basis, you can choose to take the credit for accrued taxes by checking the “Accrued” box in Part II on a timely filed original return.

I did not get that.

my last tax return, box paid is marked by a tax preparer, now what should be?

Can I take accrual, and what does mean , I mean how can I calculate the amount, is it possible give an example based on my situation?

Thanks

Re: FORM 1116

pk — Sun, 18 Feb 2024 21:47:08 GMT

@Sam Hopi just following up:

(a) accrued taxes would mean that you either have the tax bill but have not paid yet or you have calculated the amounts but not paid yet ( may be waiting for the final bill to show up or a bill that is being contested and therefore likely to change). It is like accounts payable -- you recognize that you have to pay but have not paid yet. In tax situation it would generally mean that while you recognize the amount but have not been paid ( could mean that this is an approximation or real or allocated amount but always it has not been paid and closed. Using "accrued" amount as a deduction, it can result in having to file an amended.

Does this make sense in your particular situation?

(b) below is my attempt at an example:

Let us assume that

(a) you are doing a US return for the year 2022 i.e. the UK returns of fiscal year 2021-2022 and 2022-2023 are germane.

(b) your tax rate for the rental income ( average ) is 11.80% for 2021/2022 , 12.0% for 2022-2023

(c) Also assume that everything financially remains the same for the two fiscal years except for the rent form Jan01 /Dec31 for calendar year 2021 is $1100 per month ,that for Jan01/Dec31 of 2022 is $1200 per month and lastly Jan01 /Dec31 of 2023 is $1300 per month.

Thus for UK purposes

1. Gross rental income for 2021/2022 is 9 months at $1100 =$9900 plus 3 months at $1200 =$3600 for a total of $13,500 -- tax at 11.8% =$1593

2. Gross rental income for 2022/2023 is 9 months at $1200 = $10,800 plus 3 months at $1300 = $3900 for a total of $14,700 and a tax at 12% of $1764

Note that for US tax purposes when you file US return ( if you do not ask for extension ) you do not have the final figures from the UK -- thus you would probably use "accrued" and if the final/settled /paid amount to UK is different than the "accrued" you may have to file an amended return. Many people use " extension " and file by 10/15 so that the foreign tax amounts is finalized and no amended return is required.

For US purposes ( tax year 2022):

1. Gross Rental income is 12 months at $1200 = $14,400 and foreign tax allocation = 1/4 of UK 2021/2022 plus 3/4 of UK 2022/2023 taxes = 0.25 X $1593 + 0.75X$1764 = $398.25 + $1323 =$1721,25.

2. on form 1116 your Foreign income = $14,400 and Foreign taxes paid on that income = $1721.25.

Does this make sense ?

Is there more I can do for you ?

Re: FORM 1116

Sam Hopi — Mon, 19 Feb 2024 07:05:06 GMT

Thanks a lot really appreciated.

For this parts:

1. Gross rental income for 2021/2022 is 9 months at $1100 =$9900 plus 3 months at $1200 =$3600 for a total of $13,500 -- tax at 11.8% =$1593

2. Gross rental income for 2022/2023 is 9 months at $1200 = $10,800 plus 3 months at $1300 = $3900 for a total of $14,700 and a tax at 12% of $1764

why did you count 9 month? for both parts 1 -2

One expert already mentioned most of people has cash method instead of accrued, per your explanation most of people in UK should take accrued method. So who can use cash method?

Re: FORM 1116

pk — Mon, 19 Feb 2024 19:36:56 GMT

@Sam Hopi , agree that most people do use "cash" method for everything -- both incomes and expenses. The best way to maintain this is to file only after your foreign taxes have been filed/ accepted ( i.e. settled) and thus there is no need for an amended return to the IRS.

The nine months is because only nine months of the UK tax year falls in the current US tax year -- does that make sense ?

Is there more I can do for you on this ?