Have the screens changed for reporting foreign tax credit? The instructions don’t seem to work.

[bjorna]

I have a pension being paid to me from a Swedish institution and I also have Swedish bank accounts that I have earned interest on.

I found the advice in your help section on how to report the pension income  under “Other Taxable Income”. However the instructions for how to enter the foreign tax paid on the amount don’t work. 

These are the instructions I found in this community:

"In the Deductions & Credits section, under 'Estimates and Other Taxes Paid', choose 'Foreign Tax.'

The first few screens are asking about Foreign Tax paid on 1099-Div or 1099-Int.  Continue until you reach a screen asking if you have other types of foreign income to report.  Choose 'General Category Income'  and Continue.”

When I go to “Foreign Tax Credit” per the instructions, it only refers to 1099-DIV, 1099-INT, 1099-OID or K-1. (I think my financial institution in the US I reporting some foreign tax also), and I never get to a place where I can choose “General Category Income” or link to the pension amount I previously entered. Have the screens changed?

Please advise.

Also, my next step is to also enter the interest paid to me by my Swedish bank. Should I do that as “Other Taxable Income” as well? 

[rogge1722]

To report the income from the Swedish banks, go to the wages and income section and under the 1099 area bring up a blank 1099-INT for each bank. Insert the payer's name, the amount in box 1 and the tax paid in box 6.

Then add up all the foreign tax paid on all interest and dividends and compare that to the foreign tax paid on the pension. The greater amount of tax paid will be used for Copy1 and the lesser for Copy 2 as Copy 1 should yield the greater tax credit. Advise when this is done.

[bjorna]

Thanks, I'll try that for the interest income, but my main question was about how to enter the foreign tax paid on the pension I'm receiving from Sweden.

[bjorna]

OK, I have added the interest from the Swedish bank (one each for my wife and I. I guess I could combine that  since we're filing jointly?). They didn't withhold any tax on those as the amount is below the threshold for that in Sweden.

I've also added the amount I got as pension under Other Reportable Income in the Miscellaneous Income section (the last option on that screen). They did withhold tax for that one and I don't know where to add that in TurboTax. 

Please let me know if that's the right place for the foreign pension or recommend a better place.

Note that we're not getting "standard" US forms sent to us from the Swedish bank or the Swedish payer of the pension.

[rogge1722]

Do you have any foreign taxes paid on a 1099-DIV or on a K-1 or any source other than the pension?

Reporting the pension under Miscellaneous will work but it will be taxed at Ordinary Income Rates.  Have you reviewed the tax treaty to see if pension income might receive a more favorable tax treatment?

[bjorna]

My financial institution here in the US is reporting a small amount of foreign tax paid ( < $20 ). It was imported into TurboTax and I can also find that when I look at the 1099 Composite form from them, in the Dividends and Distributions section - probably because one of my funds maybe has foreign investments.

What's the alternative to reporting the pension under Miscellaneous? and would that allow me to enter the foreign tax paid? (that's still the core question, where to input the foreign tax paid for the pension amount)

I have not reviewed the tax treaty in detail and would appreciate advice. I retired in October 2024, so the amounts are small this year but I want to get it right so I know for next year when the amounts will be larger.

[rogge1722]

The Miscellaneous Section will work to report the income.  I have no opinion on the tax treaty.  Here is the procedure to to input the data.  Copy 1 is used for the pension.  Copy 2 is used for the dividends.

By default, TT will want to process the dividends first, so we go thru the initial screens with minimal entries to get to the back section to process the pension income first.  To ensure a clean start, delete form 1116.

1. Foreign Tax Credit.
            Continue
   2. Tell us about your foreign taxes.
           This screen may or may not appear for various reasons.
          If displayed, click on Continue.
   3. Foreign Taxes
           Continue
   4. Do you want deduction or credit?
           Credit
   5. Reporting foreign taxes paid
          Continue.
   6. Where did you receive dividend income?
           Not used at this time, so just select the first one then Continue
   7. Income from foreign countries
          Done
   8. Need to report income
           No
   9. Simplified limitation election for AMT
           This screen may or may not appear for various reasons.
           If displayed, will assume YES is selected
   10. No other income or expenses
            No
   11. Completing forms 1116
             Continue
   12. Foreign tax credit worksheet
            Continue
   13. Choose the income type
            This starts the back section for pension income. Choose General category then Continue
   14. Country Summary
            Click on Add a Country.
   15. Select Country from the list.
   16. Other Gross Income-Country
             Enter the description and the amount even though entered elsewhere.
   17. Definitely related expenses
            Enter any applicable amount.
   18. Foreign Losses.
             Enter any applicable amount.
   19 Foreign taxes paid.
             Enter the amount in box for other income.
   20. Country Summary
            Done
   21. Continue thru the next several screens until you reach:
   22. Foreign Tax Credit Summary.
            You should see displayed Copy 1 General Category Income.
           Click Done.
   23. Go thru a few more screens and exit the interview.

Now re-enter the interview. Enter the data for the dividends and TT will generate  Copy 2, passive category , F1116. TT may ask for paid or accrued and the date paid. The default is “Paid” and the date 12/31/2024.

Lastly, verify that Copy 1 displays the greater amount of credit.

[bjorna]

Thanks, that seems to work. I've now passed the error check for Federal