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lars-holzhausen
New Member

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

I am a foreign national and US permanent resident and grew up outside the US. Before immigrating to the US, I had opened a stock depot (similar to a Fidelity-type target fund).  I now want to sell the stocks. The stocks will be automatically subject to capital gains tax withholding in the foreign country. I want to know how to handle this tax situation.
5 Replies
Critter
Level 15

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

Yes you do however you can use either the foreign tax credit or Sch A deduction so you are not double taxed.

lars-holzhausen
New Member

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

Thank you for your quick response. How do I claim this foreign tax credit then? Can I use TurboTax for that?
peretzaviv
New Member

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

I have a similar issue, could you share how you ended up handling yours using TurboTax? @lars.holzhausen
Critter
Level 15

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

Where do I enter the foreign tax credit (Form 1116) or deduction?

Both the credit and the deduction are entered in the same place.

After entering all your foreign income, here's what you do:

  1. Open your return.
    (To do this, sign in to TurboTax and click the orange Take me to my return button.)
  2. Do a search for foreign tax credit and then click the "Jump to" link in the search results.
  3. Click Continue and carefully follow the onscreen instructions.

In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through the foreign tax screens.

If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.

Note: You won't be able to take a credit or deduction for taxes paid (or accrued) on excluded foreign earned income or housing. This is because excluded income and housing isn't taxed in the first place.


peretzaviv
New Member

Do I need to pay US capital gains tax on foreign stocks when I already pay capital gains tax in the foreign country where the stocks are held? (I am a US resident.)

I tried doing that but got the message: "We don't see any foreign tax payments made".
Again, it's capital gains tax on foreign *stocks* (not salary or property) I'm asking about. I reported that on TurboTax under "Stocks, Mutual Funds, Bonds, Other". I tried reporting them under "Foreign Earned Income and Exclusion" but none of the forms fits and so I get to the message "No Foreign Income Has Been Entered". What am I doing wrong? @Critter#2
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