When asked to enter my foreign earned income on which I pay foreign taxes, should I enter gross or net foreign earned income?

[MargaretL]

Gross foreign earned income is entered (before taxes) for the foreign earned income exclusion. Then, please be sure to go to Deductions & Credits>Estimates and other Taxes Paid>Foreign Taxes and enter the taxes that you paid on the foreign income to claim foreign tax credit. 

[KarenJ2]

Gross foreign earned income is entered (before taxes) for the foreign earned income exclusion, unless you have self-employment income, then you would enter your net self-employment income after expenses.

Then, please be sure to go to Deductions & Credits>Estimates and other Taxes Paid>Foreign

Taxes and enter the taxes that you paid on the foreign income to claim foreign tax credit. 

[Matpel]

Thanks for your answers. I have an extra question : I'm based in France, and I'm not very clear on what is the IRS taxable revenu definition (what we have to declare in Form 1040 as "wages and salaries").

- Is it my French Incomes before social contribution, and before Income tax (in France we call it "Salaire Brut").

- or my French Incomes after social contribution, and before Income tax (called "Salaire Net").

In France, the taxable revenu is our Incomes after social contribution.

[AmyC]

Before contributions so Salaire Brut. Then you will enter the taxes you paid to France on the Form 1116.

You probably want the credit option. See Where do I enter the foreign tax credit (Form 1116) or deduction for 2019?

@Matpel

[Maddy_G]

Hi,

I have another question regarding this topic: Does the IRS consider social deductions paid on a French income  as foreign taxes that have already been paid? Are we able to deduct these social contributions from our taxes?

Thanks!

[HopeS]

Yes, U.S. Citizens & Green Card holders in France can now deduct social contributions as a foreign tax credit.

See the below excerpt from the IRS.Gov.

•  This Practice Unit is updated to reflect a change in IRS’ position. The IRS is no longer challenging the creditability of the French Contribution Sociale Generalisee (CSG) and Contribution au Remboursement de la Dette Sociate (CRDS) for the U.S. Foreign Tax Credit (FTC). This change is based on a shared understanding, memorialized in diplomatic communications in 2019 between the U.S. and France that the CSG and CRDS are not covered by the U.S.-France Totalization Agreement. The IRS historically had taken the position that the CSG and CRDS were covered by that agreement and therefore not creditable under an off-Code provision in the

•  U.S. persons living and working in France may be claiming the FTC derived from taxes paid to France. The issue generally pertains to the creditability of certain French foreign taxes paid, particularly the two social welfare taxes, CSG and CRDS which are borne by individuals employed in France. All natural persons domiciled in France for income tax assessment purposes are liable to pay CSG and CRDS. The taxes are assessed on items such as wages, substitute income, professional fees, statutory family benefits, and investment income.  As mentioned in the above note, the IRS no longer maintains that the CSG and CRDS are ineligible for a foreign tax credit under IRC

Steps to enter Foreign Tax Credit:

Both the credit and the deduction are entered in the same place. Here's what you do:

1. Open (continue) your return in TurboTax
2. Make sure you've already entered all your foreign income. If you still need to enter it, do that now
3. Select Search and search for the foreign tax credit. Select the Jump to link in the search results
4. When you reach the screen Do You Want the Deduction or the Credit? select the option you prefer for your situation
5. If you select Take a Credit:
   • Select Continue on the next screen, then select No to fill out Form 1116
   • When you reach the screen Country Summary, select Add a Country
   • Answer the questions about your foreign income, taxes, and expenses on the following screens
   • When finished, you'll be taken back to the Country Summary screen. If you have income from other countries to enter, select Add a Country. Otherwise, select Done
   • Answer the questions on the following screens until you reach your Foreign Tax Credit Summary. If you’re finished with this section, select Done
6. If you select Itemized Deduction:
   • Enter your foreign taxes paid on the next screen. These should show up in the Deductions & Credits section of your tax return, under Other Deductible Expenses

In most cases, taking credit works out better than deducting. TurboTax will help you decide which one's best for you when you go through this section.

If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit, if your situation requires it.

Click on the link below for more information on Form 1116:

Foreign Tax Credit

@Maddy_G