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.
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'?
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.
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?
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:
- Open up your tax return in TurboTax
- Select Federal Taxes
- Select Deductions and Credits
- Scroll down to the section "Estimates and Other Taxes Paid"
- Select Foreign Taxes
- Follow through this section to enter the foreign taxes paid