What is foreign source income when claiming tax credit on vanguard fund? Is it "QDI eligible foreign income"?

[KurtL1]

On a Vanguard statement, there is a separate listing of all dividends. Usually on the statement there is a column for the foreign tax on the dividends. When you locate a foreign tax you should look to the left and you should see the dividend amount. Do not add the Qualified Dividend amount if there is an amount.

You will need to add all the dividend amounts to find the "Foreign Income" amount on the foreign taxes.

[YCinMA]

After reading through two pages of replies, I finally found the answer I need from your reply!

In other words, to answer the "Report Foreign Dividends" TT interview using my 1099-DIV from Vanguard, I should add up all the "Security Total" in Box 1a (total ordinary dividends) with a non zero Box 7 (foreign tax paid) on the same row.

Thank you so much!

[Garibaldi]

So I've read this thread and am still confused.  KurtL1 came close to resolving for me, but still a few questions.

1.  On the Form 1099-Div, I see Box 7 with the Foreign Tax Paid.  I look to the left and there are 2 columns with dividends.  There are Ordinary Dividends (Box 1a), and Qualified dividends (Box 1b).  So is the "Foreign Tax Income" the "Security Total" (which is the sum of each dividend) for Box 1a, Box 1b, OR the sum of the Security Totals for Box 1a and 1b.  To be extra clear, if the Security Total for Box 1a is 5, and the Security Total for Box 1b is 3, is my Foreign Income 5, 3, or 8?

2.  There is a separate tax form entitled "2019 Tax Paid" with lists the total foreign tax paid.  There are also 2 other columns, "Foreign Income" and "QDI eligible foreign income".  Foreign income is very similar, but slightly higher, than the Security Total for Box 1a.  QDI eligible foreign income is very similar, but slightly higher, than the Security Total for Box 1b.

  a.  WTF?

  b.  Should the numbers on the Foreign Tax Paid form be used to determine Foreign Income?  If so, is it just Foreign Income, QDI eligible foreign income, or the sum of both that's used?

Thanks for your help!!!

[Garibaldi]

So not to answer my own question, but I called Vanguard and found out the answer.

1.  So Foreign Tax Income is NOT the amount in Box 1a, 1b, OR the sum.  Do NOT use the amounts on the 1099-DIV to determine foreign income.

2.  First, a correction.  The amount on the "2019 Foreign Tax Paid" Form is not higher than the amounts on the 1099-DIV, it is slightly lower (at least for the fund that I was looking at).  With that out of the way, you should use the Total Foreign Income identified on the "2019 Foreign Tax Paid" form.   So this answer was confirmed with Vanguard.  However, I think (but did not confirm) the reason for the difference between the 1099-Div and the "2019 Foreign Tax Paid" form is that not all of the dividends come from foreign companies.  In my case about 98% of the dividends came from foreign companies, which is why Foreign Income is slightly lower on the "2019 Foreign Tax Paid" form than the amount listed in Box 1a of 1099-DIV.

I'm not sure of why QDI eligible foreign income is identified, but at least for my purposes it doesn't seem relevant.

TLDR: just use the info on "2019 Foreign Tax Paid" form.  Ignore QDI eligible foreign income.

[Chaz9]

Thanks for your answer!  Vanguard does not invest in any countries like Iran or Cuba that we are not allowed to claim the foreign income or taxes paid - correct?   Said another way, we can just take the  sum of unqualified dividends, qualified dividends and capital gains as you suggest and not have to subtract any unqualified foreign income?

[AmyC]

Qualified foreign dividends are from qualified countries. Vanguard does publish this 2021 Foreign tax credit information for eligible Vanguard funds which should answer all your questions. You just locate your fund, multiply your investment amount times the various percentages to get your answer.

@Chaz9

[richardk19]

@AmyC: Thanks for the Vanguard link! 

To clarify: Should I multiply my "Total ordinary dividends (Box 1a)" from my 1099-DIV by the "Column 2: Qualified foreign dividend income" from the 2021 Foreign tax credit information for eligible Vanguard funds publication to find my qualified foreign dividends for each Vanguard fund (International Explorer, etc.)?

And I would choose the "These foreign dividends are from a mutual fund/RIC" option and not "from another source" on Turbotax after I enter the amount of the foreign dividends?

Thank you!

[AmyC]

RIC is the correct option for the 1116. I am glad you read the directions for the 3 columns! Follow them, for the correct qualified dividends and tax paid. Column 1 is for the foreign source income. 

@richardk19