I've paid foreign taxes on RSU income already includes in my W2. How do i claim a foreign tax credit for this.

[KarenJ]

What is GSU income?

[taxnewbie5]

Sorry I mean RSU, Restricted Stock Units

[suzyquzy]

I do not see how foreign source income included in a W-2 is not taxable. I do not think it should be subtracted on Line 21. Edited to insert "not"

Further, if it is not taxable in the US, then you cannot claim a foreign tax credit because it has not been taxed by the US and another country.

[kiranin1989]

Then how should we handle it? But I think you are right, either it is used as itemized deduction from taxable income or we claim foreign tax credit, It cant be both.

[KarenJ]

If this situation applies to you.  Enter your W-2 information and then go to Foreign Earned Income Exclusion and indicate that you received foreign income on a W-2.  TurboTax will ask you how much of your W-2 was foreign.  Indicate the foreign amount and continue.  You do not want to claim the foreign earned income exclusion, only foreign tax credit.

[kiranin1989]

So reporting foreign earned income as you mentioned here is not same way as mentioned in main answer(from miscellaneous income section) ?
Because mine is for exact same reason, that is RSU vesting.

And in forign tax credit section, what income category does RSU vesting income qualify for? 'General Income'?

[KarenJ]

This year they are asking what part of the W-2 is foreign so you do not need to subtract it one place and reenter it another place.  RSU would be general limitation income.

[kiranin1989]

Thanks 🙂

[bcl080]

Hi, I am confused by the same scenario. I was granted RSU's which have been vesting over 4 years and during that time I have worked for the company in Australia, NYC and now Los Angeles. I paid tax in Australia for the Australian taxed portion of the RSUs vesting in 2018 and that was communicated via an Australian Tax document but my USA W2 also lists that Australian portion of the RSUs as income.
I originally followed the method you noted in the response 1 year ago and I could understand that but following this new method suggested above has confused me.

In your note above "If this situation..." I go to the "Foreign Earned Income Exclusion.." section and you mentioned I need to "indicate that you received foreign income on a W-2" which I select which then directs me to "go back and enter that income in the wages & income section" where my USA W2 is already listed. I wondered if I needed to enter my australian tax information as a new W2 but Australia doesn't issue W2's and that didn't make sense. Can you provide a bit more information regarding how and where this needs to be entered please.

[kiranin1989]

Exactly this one is much more confusing? but by the way when you filed last year, did that work ok?
I still did not file, because I am still not clear about process.
When filing W2 if I indicate that income in this W2 is foreign then it allows me to put exact negative number to offset, that works fine at first. But it only gives option of exclusion of that amount if I select no for exclusion then i cant really go forward.

Did you claim foreign tax credits last year? Did you enter than in general category?

[bcl080]

Last year (2017) I had a tax agent do my tax but figured I would try myself this year with turbo tax and yes, the tax agent just listed my Foreign tax on a form 1116 and listed it under "general category income".

[vb1]

Were you able to file this year? I also have the same scenario and am quite confused. Thanks.

[bcl080]

I was able to but after further reviewing my W2 I realized this year it didn't include the portion allocated outside of the US, only those allocated to US so my tax ended up being a whole not easier after re-calculating my W2 total.

[KarenJ]

You would need to know the amount of RSU included in your W-2 wages.  After determining this amount, you will need to allocate the income by between foreign and US workdays between grant and vest.   If 50% of your workdays during this time were in a foreign country, then 50% of your RSU income would be foreign source.  US source income cannot be offset by foreign tax credits.

You would enter you W-2 as you normally would in TurboTax.  Then you would go to Miscellaneous income to enter the amount of foreign source RSU income as a negative number on line 21, page 1 of your 1040.

Please follow the instructions below to report your foreign RSU income as a negative on line 21:

• Click Federal Taxes -> Wages & Income and scroll down to Less Common Income
• Go to the last selection, Miscellaneous Income and click Start
• Go to the last option, Other reportable income and click Start
• When it asks, "Any other reportable income?" say yes and then type in a description and the amount to report it on your tax return (make sure this is a negative number)

The you need to go to the foreign tax credit section of TurboTax to enter the foreign income (amount that you entered as a negative on line 21) so that you may take credit for the foreign taxes you already paid.

To include the amount of foreign taxes you paid, follow these steps for TTPremier:

1. Open up your tax return in TurboTax
2. Select Federal Taxes
3. Select Deductions and Credits
4. Scroll down to the section "Estimates and Other Taxes Paid"
5. Select Foreign Taxes
6. Follow through this section to enter the foreign  taxes paid