I get dividend income from a Canadian company that withhold 15% for Canadian taxes. When using TT, I go to Federal Taxes, Deductions and Credits, Under Estimatesand Other Taxes Paid, Foreign Tax, and I try to input my information but TT is not very clear what to enter and it kicks me out when i try credit vs deduction. What can I do so I can go through the process and select the best option (credit or deduction?
if your single are your total foreign taxes from passive activities (for this purpose passive activities are portfolio income - not the income from passive actives like rent etc) less than $300 or $600 if married. then you can take the credit without filing form 1116 assuming you do not have FTC form other categories such as general,
to do this you need to go to the form with the foreign dividends.
go to box 7 and enter the amount - do not link to form 1116 or choose a column. if your foreign taxes are below the threshold above, it will always be better to take the credit since it reduces your taxes $ for $ while at best a detection would only reduce your taxes about 40% of the amount.
thank you for replying. I'm married filing jointly, my foreign dividend is significantly higher than the limits you mentioned below. the dividends were in tens of thousands and I paid thousands in Canadian taxes. I live in the US. it just happened the company i received dividends from is Canadian.
You need to first enter the dividend in the 1099-Div section as if you had received a 1099-Div. Click on the box that your form has more boxes and input your Canadian tax in Box 7.
Then you will need to go to the Foreign Tax Credit Section of TurboTax to input additional information about the dividends. You should be able to click on deduction or credit and continue. Credit is usually the best choice.