Can I take a Foreign Tax Credit for foreign taxes paid on my US retirement income?

[jotlaptop]

I am a US citizen, resident in Portugal on a retiree visa for all of taxyear2025, must pay income tax to Portugal on my pension/dividends; I was not "working outside the US"; all of the income is passive. Is the PT tax deductible on form1116? Thus if I delay filing US until after PT filing, I can reduce my US tax obligation for 2025 by the PT tax amount; and thus I need not pay full estimated amount to US now, can wait until 15June to calculate.

[pk]

@jotlaptop , 

(a) Since you are abroad on 4/15, your filing date gets extended to 6/15 but payment of taxes due is still 04/15.

(b) As a resident Portugal taxes you on world income and therefore you end up with double taxation on most / all of your income.

(c) Yes,  you can indeed claim FTC for taxes paid to Portugal on doubly taxed income  ( either in US or in Portugal).  For US purposes, and on form 1116 you would have to "resource by treaty"  to be able to treat the US sourced pension etc. to be able to claim the FTC.  Article 20 and 21 and  25 are germane in this case.

Is there more I can do for you ?

[jotlaptop]

Today my form1040 owes some money; but I will take the form1116 tax credit on my 2025return next month, after I file & pay my Portugal tax.

Therefore, the money that I owe to US will be reduced, so therefore I do not need to pay any estimated amount now, as the final calculation next month will be less than my 2025withholding.  

Correct? (in principle)

[pk]

@jotlaptop , just work through the return.  I say this because while  US will recognize the full amount of Foreign Taxes paid, the allowable  amount ( the amount reducing your US taxes ) is the lesser of actual Paid and that imposed by the US on the same doubly taxed income.   Thus the need for preparing thr return, so you know how much the credit is going to be.

The unused portion of the FT is  carried  ( back one year or forward ten years ).

Does this make sense ?   Is there more I can do for you?