I have investments in a foreign country which generate interest income but are still invested / have not matured yet. Do I need to report them as interest income?

[fabiomf81]

As an example, in that country, I only pay taxes over that interest income once the investment matures or if I do an early withdraw of money from it.

[Mike9241 · Accepted solution]

https://www.goldinglawyers.com/how-does-the-irs-tax-foreign-certificate-of-deposit-interest/#:~:text...).

another issue is the foreign tax credit

Credit for Taxes Paid or Accrued
You can claim the credit for a qualified foreign tax in the tax year in which you pay or accrue it, depending on your method of accounting. "Tax year" refers to the tax year for which your U.S. return is filed, not the tax year for which your foreign return is filed.

Accrual Method of Accounting
If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Foreign taxes generally accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined.

Cash Method of Accounting
If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them.

Choosing to Accrue Taxes
Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. You make the choice by checking the box in Part II of Form 1116. Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. In addition, the choice to accrue foreign taxes applies to all foreign taxes qualified for the credit. You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued.

If you make the choice to accrue foreign taxes and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes.

[HelenC12]

If the interest is posted to your account, then you claim it on your income tax return in the year you received the interest. If you do an early withdraw and have a penalty, you'll be able to claim the early-withdrawal penalty on your Form 1040, Schedule 1, Part II Adjustments to Income, Line 17.

• A cash basis taxpayer is a taxpayer who reports income and deductions in the year that they are actually paid or received.