Additional Foreign Tax Credit on U.S. Income worksheet Publication 514

[mdsaronson]

Hi there.  I am a US citizen tax resident in the UK.  I am taxed in the UK on my US source income, subject to the taxing rights assigned to the US under the US-UK tax treaty.  Under the treaty, the US agrees to provide a US tax credit to US citizens in respect of UK tax in excess of what the US may tax a UK resident non-US citizen (0% on interest, 15% on dividends).  Any otherwise US source interest and divdend yielding US tax in excess of that amount is resourced.  IRS Publication 514 provides a worksheet to calculate the additional foreign tax credit permitted and instructs the taxpayer to "Add this amount to line 12 of Part III and line 32 of Part IV of Form 1116".

How do I do this in turbo tax without override values?

Thank you in advance

[pk]

@mdsaronson , 

(a) in general , when the US is limited by treaty to specific tax rates, it is usually achieved by "adjustment" to the  "foreign source" income.    TurboTax has a screen for this. And IRS instruction for  form 1116  provides the adjustment amount to be used.  Should not use  "over-ride" as this may  ( not always ) disallow e-filing.

( b)  If you are talking about 2024 tax year, many screens  associated with Foreign source income / taxation  are not  operational yet --- think they are targeting for Jan 18th ( or thereabout ) to effective.

Does this help or am I  in the total left field ?

[mdsaronson]

Thanks @pk .  I think my issue is slightly different.  The instructions to Form 1116 for 2023 include the following paragraph at the bottom right of page 2:

U.S. citizens living in certain treaty countries may be able
to take an additional foreign tax credit for foreign tax imposed
on certain items of income from the United States. See Tax
Treaties in Pub. 514 for details. If this applies to you, use the
worksheet near the end of Pub. 514 to help you figure this
additional credit.

The instructions for the worksheet in Publication 514 contain the following instructions (for the third step in the calculations) link here - Pub 514 (worksheet is on p.43, instructions on p.44):

There does not seem to be a place in TurboTax where I can add the Line 21 amount to the reduction in foreign taxes on Part III, line 12 or where I can add that amount to Part IV, line 32.

Very much appreciate your time and assistance!

[mdsaronson]

One more quick addition here.  There actually is a space for one to enter this information on the TurboTax Foreign Tax Credit Computation Worksheet, snippet below, but the field is not active.  The text instructs one to see tax help, but I cannot find instructions in the help section.

[pk]

@mdsaronson  while I generally agree with your position of   using adjustments to the income to  achieve  the  taxing rates  , it is much more complicated method.  If the intent is to  reduce the burden of "double taxation" i.e.  same  income being taxed by both the  source country and the resident country ( arises when each country  is using  "world income"  of the resident ),  then the easier path is  to  get foreign tax credit   for taxes paid to the other taxing authority.  Thus for dividends and interest income  from, US sources  that are taxed by both the UK and US on a beneficial owner  whom is  a  UK resident  ( e.g.  US citizen/ GreenCard ) , one can use   "Resourced by Treaty on form 1116 to essentially  reduce the US tax on this doubly taxed income.

By using the  adjustment mechanism ( allowed max tax by treaty ) and depending on exact facts and circumstances,  may not be useful.

My reference here is  US-UK Tax treaty and explanatory notes -- >   United Kingdom (UK) - Tax treaty documents | Internal Revenue Service

Is there more I can do for you ?

pk