When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.
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New Member

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

 
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Level 11
Level 11

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

if your foreign income is of general category ( wages, interest income  etc. ) then you are correct in using the simplified method.  If you have incomes  from many categoreis, including trusts, complicated investment portfolios  etc. and / or multi category carry over credits, do not choose simplied  method.

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Returning Member

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

What about income from the sale of a rental property?
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Level 11
Level 11

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

That is capital gain/ loss .
You enter this just as if the property disposed was in the USA --- Tell TurboTax that you have assets that were disposed in 2018.  All your basis, sales proceeds etc. must be converted to US$ of the day -- the exchange rate being based on US Treasury, known sites, or bank in the country where the transaction took place.  Any taxes paid on this gain/loss situation to a foreign taxing authority is eligible for foreign tax credit or deduction ( if use itemized deduction )
If you need more on this , please include your questions in comments and I will circle back
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Level 2

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

How can I determine if I've used this method on a past return?

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Expert Alumni

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

If this is the first year you claim the foreign tax credit, you would check the box for "First year I am eligible for the election". 

 

The other two options are for if you have claimed the foreign tax credit and made the election in the past.  Please continue to read:

 

For foreign tax credit, there seem to be 2 elections that can be made:

  1. If the amount is less than $300 (or $600 for married filing jointly) then you can claim FTC without filing Form 1116. [1]. This amount can also be used directly as FTC for AMT purposes. [2]

  2. If you have both AMT and FTC, then you can elect for "Simplified Limitation" which lets you use the same foreign source income for AMT as for regular taxes.

The second election has the condition that you have to make the choice the first time you have the option and that applies for all later tax years

You may elect to use a simplified section 904 limitation to figure your AMTFTC. If you do, when figuring your AMTFTC, you will use the same net foreign source income for AMT that you used for regular tax. (The amount on line 17 of your AMT Form 1116 will be the same as the amount on line 17 of your regular tax Form 1116.) You must make the election for the first tax year after 1997 for which you claim an AMTFTC. If you don’t make the election for that year, you may not make it for a later year. Once made, the election applies to all later tax years and may be revoked only with IRS consent. [3]

 

@zellgrotto

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Level 2

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

I'm using the Premier addition of TurboTax and at the FTC interview section on selecting the method it lets me know that I have used the complicated method in the past, but it doesn't tell me which year.  If you have always used the simplified method I'm not sure it would flag your choice of the simplified method for this year. 

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Expert Alumni

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

According to the following Turbo Tax link, if your foreign income is of general category ( wages, interest income  etc. ) then you are correct in using the simplified method.  If you have incomes  from multiple categories, including trusts, complicated investment portfolios  etc. and / or multi category carry over credits, do not choose simplied  method.

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Level 1

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

Thanks for this detail!

 

> If you have incomes from multiple categories, ...

 

Should this instead read "If you have or ever expect to have incomes from multiple categories, ..."?

 

This choice seems to carry through to future tax years. If I think I might have foreign income from multiple categories in the future, then it seems like I should avoid the simplified method now, correct?

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Expert Alumni

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

That is correct, A simple rule to follow if you are making this decision is if your foreign income is of general category ( wages, interest income  etc. ) then you are correct in using the simplified method.  If you have incomes  from many categories , including trusts, complicated investment portfolios  etc. and / or multi category carry over credits, do not choose simplified  method.  

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Level 1

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

how do I know my election for Foreign Tax credit in previous TurboTax years

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Expert Alumni

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

You would need to look at the Form 1116 for each year.

 

There is a worksheet called Foreign Tax Credit Computation Worksheet. If you have the worksheet in this year's taxes that may help you too. 

 

@quimper25

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Level 2

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

Thanks, is there a line or a box on the form 1116 that would let me know that I have taken the simplified method or not?

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Level 2

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

It looks like I once used the AMT adjustments for form 1116 foreign tax credit so I can’t use the simplified method, though I doubt I will ever have an entry for the several questions the longer interview asks.  The only one I have doubts about is the question on high tax kickout.  Would this be reported on a 1099?  I only have passive mutual fund (RIC) income (dividends) from an international fund.  

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Expert Alumni

When should you elect to use the Simplified AMT Foreign Tax Credit Limitation? This is my first year claiming FTC and I don't understand how I should answer this.

The kickout would only apply to passive income, such as rental income and capital gains on sale of rental property. It would not apply to dividend or interest income.

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