Citizen but non-resident of US with US income - claiming tax credit for foreign tax on US income

[SimonOfMontana]

I am a US citizen but I am currently tax-resident in Australia.    Some of my US income is taxable in Australia.   I believe I can claim a tax credit in the US for this - but I cannot see how to enter it in TurboTax.

[TomD8]

See this previous TT Q&A:

Where should I enter income tax that I paid in a foreign country? I am an expat working abroad and t...

[SimonOfMontana]

So again:  US Citizen, currently permanent tax resident in Australia - so paying Australian tax on most US income (Interest, Dividends, Capital Gains, SEP/IRA Distributions).   Aust/US have a Tax Treaty to minimize double taxation, although US can additionally tax some income up to a % limit. 

Note: The Turbo Tax functionality for Foreign Tax Credit allows only allocation of non-US income to the foreign tax paid functionality - the USA is not an available option to assign income to foreign tax paid.

Perhaps this has to be done outside TT ?

[bweiler]

I have the same question, but for Spain which shouldn't make a difference.

[DaveF1006]

To clarify, what type of foreign income do you have?

@bweiler 

[bweiler]

As with the gentleman from Australia, when you retire and move to another country that country may tax your worldwide income even though you make no money in the country you reside.

I live in Spain under a non-lucrative visa (you can not work in Spain under this visa). I earn no money here in Spain, but Spain taxes my worldwide income (US income from investments in my case) at a higher rate than the US. This means I pay Spain several thousand dollars a year. This is worth it so far to live here, but I would like to be able to use the Spain taxes I pay to offset my US tax burden.

I found form 1116 in Turbo Tax, but it seems oriented to foreign income based taxes. Can I use Turbo Tax to deduct all or a portion of the Spain taxes I pay to offset my US taxes.

Hopefully this provides sufficient information to get an answer. I know many people who would like to know how to do this. 

Thanks

[AmyC]

The US - Spain treaty has limitations and non-taxable income covered. The Form 1116 will not help you since you have no foreign income.

Some nontaxable income can be excluded and e-filed while other requires mailing your return and attaching  Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).

Claiming Tax Treaty Benefits states:

The payee does not have to file Form 8833 for any of the following situations:

1. The payee can claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate.
2. The payee can claim a treaty exemption that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants.
3. The payee can claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement.
4. The payee is a partner in a partnership, or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return.
5. The payments or items of income that are otherwise required to be disclosed total no more than $10,000.

@bweiler 

[DonaldA]

There is a good answer, with step by step instructions at https://ttlc.intuit.com/community/taxes/discussion/foreign-income-tax-paid-on-us-income-how-to-get-c...