Foreign Tax Credit for Asset Sale

[mvalluri]

US/CA resident. I sold a property in India and paid capital gains tax in India.

I have reported the capital gains in my TurboTax Online/Premium return.

However, TurboTax Online only allows entry of foreign taxes paid while working overseas.

How do I report the taxes paid in India in order to claim relief under the applicable tax treaty (or foreign tax credit)?

[DaveF1006]

No. You can gain some relief from the taxes you paid in India. You don't need to work overseas to claim a tax credit.  Besides, you are talking about capital gains here and not wages earned from working overseas. Follow these steps.

1. Go to Deductions & Credits > Estimates and Other Taxes Paid > Foreign Tax Credit.
2. When asked "Tell Us About Your Foreign Taxes," select "None of these apply" to bypass the wage-only screens.
3. Choose Take the Credit (usually more beneficial than a deduction).
4. Select Passive Income as the category (Real estate gains fall under this).
5. Add India as the country.
6. Income Entry: When asked for "Other Gross Income," enter the Gross Sale Price in USD.
7. Taxes Paid: Enter the amount of tax you paid to India in USD. Use the exchange rate from the date you paid the tax.

Keep in mind you won't receive a full credit on taxes paid in India IF the tax rate is higher than the US tax rate for the same gain. The IRS will only give you a credit up to the amount of U.S. tax you would have paid on that specific income.

One last thing to mention. California is one of the few states that doesn't allow a credit for taxes paid to a foreign country. California (FTB) will tax your money from all countries, including India., but it won't give you a credit for the tax you paid to India, and as result, you will face double taxation at the state level. 

[mvalluri]

When I go to:
  Deductions & Credits > Estimates and Other Taxes Paid > Foreign Tax Credit.

I see this:

I don't see a path to any of these:
"Tell Us About Your Foreign Taxes," select "None of these apply" to bypass the wage-only screens.

Choose Take the Credit (usually more beneficial than a deduction).

Select Passive Income as the category (Real estate gains fall under this).

...

Thanks.

[DaveF1006]

Yes. Here is a more direct route to follow to see if this makes more sense. In this path, there's no option to bypass the wages-only screen, so ignore that part of the instruction.

1. Open (continue) your return in TurboTax
2. Go to federal>deductions and credits>estimate and other taxes paid
3. Foreign taxes >start
4. When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation
5. If you select Take a Credit:
   • Continue through the screens until it asks for income type. Here, select passive income.
   • When you reach the screen Country Summary, select Add a Country. Add india
   • Other Gross income enter the gross proceeds from the equity fund
   • Don't enter the expenses as this may negatively impact your Foreign Tax paid.
   • Foreign losses. You may wish to leave this blank.
   • Foreign taxes paid. Select the option that mentions foreign taxes paid on rent, royalty or other income
   • Be sure to indicate the date these were paid
   • Answer the questions about your foreign income, taxes, and expenses on the following screens
   • When finished, you'll be taken back to the Country Summary screen. If you have income from other countries to enter, select Add a Country. Otherwise, select Done

Continue through this section until you reach the end.