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ronbeamer
New Member

Where do I enter foreign income tax paid on interest earned in a foreign country?

I've entered the interest income on Schedule B
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DS30
New Member

Where do I enter foreign income tax paid on interest earned in a foreign country?

You can include both the interest income and the foreign taxes paid on this interest income under the 1099-INT section. Just make sure that you include this amount in USD. Also, if you paid any foreign taxes on this interest income, you will be able to take a Foreign Tax Credit for taxes paid on income that is also taxed in the US.

The Internal Revenue Service has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when you received the income. Please refer to the following IRS links for more information about Foreign Currency and Currency Exchange Rates and Yearly Average Currency Exchange Rates

To enter this transaction in TurboTax Online (for TurboTax Online sign-in, click Here , then select "Take Me to My Return") or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list or see more income)
  4. Scroll down the screen until to come to the section “Interest and Dividends”
  5. Choose “ Interest on 1099-INT” and select “start’
  6. Select "I'll type it in myself"
  7. Enter the name of the foreign bank, the amount (in USD) in box 1
  8. Check the box "My form has info in more than just box 1 (this is uncommon)".
  9. Enter any foreign taxes paid in box 6 (screenshot)

Alternatively, you can enter your foreign taxes paid under the foreign tax section.

To enter your foreign taxes in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Deductions and credits”
  3. Next click on "jump to full list" or “I’ll choose what I work on”
  4. Scroll down the screen until to come to the section “Estimates and Other Taxes Paid”
  5. Choose "show more", then Foreign taxes and follow the onscreen instructions.

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

  1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)


View solution in original post

3 Replies
DS30
New Member

Where do I enter foreign income tax paid on interest earned in a foreign country?

You can include both the interest income and the foreign taxes paid on this interest income under the 1099-INT section. Just make sure that you include this amount in USD. Also, if you paid any foreign taxes on this interest income, you will be able to take a Foreign Tax Credit for taxes paid on income that is also taxed in the US.

The Internal Revenue Service has no official exchange rate. In general, use the exchange rate prevailing (i.e., the spot rate) when you received the income. Please refer to the following IRS links for more information about Foreign Currency and Currency Exchange Rates and Yearly Average Currency Exchange Rates

To enter this transaction in TurboTax Online (for TurboTax Online sign-in, click Here , then select "Take Me to My Return") or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Wages & Income” ("Personal Income" in TurboTax Home & Business)
  3. Next click on “I’ll choose what I work on” (jump to full list or see more income)
  4. Scroll down the screen until to come to the section “Interest and Dividends”
  5. Choose “ Interest on 1099-INT” and select “start’
  6. Select "I'll type it in myself"
  7. Enter the name of the foreign bank, the amount (in USD) in box 1
  8. Check the box "My form has info in more than just box 1 (this is uncommon)".
  9. Enter any foreign taxes paid in box 6 (screenshot)

Alternatively, you can enter your foreign taxes paid under the foreign tax section.

To enter your foreign taxes in TurboTax Online or Desktop, please follow these steps:

  1. Once you are in your tax return, click on the “Federal Taxes” tab ("Personal" tab in TurboTax Home & Business)
  2. Next click on “Deductions and credits”
  3. Next click on "jump to full list" or “I’ll choose what I work on”
  4. Scroll down the screen until to come to the section “Estimates and Other Taxes Paid”
  5. Choose "show more", then Foreign taxes and follow the onscreen instructions.

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

  1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)


Where do I enter foreign income tax paid on interest earned in a foreign country?

Hi: 

  1. I have paid tax in India on both interest income on 3 bank accounts and also capital gains. Since once you file the India return, the tax payment calculation is for the overall income (Ex: after standard deduction, credits..etc.,) and there is no way to exactly connect how much tax was paid for each of the bank account interest income and how much for capital gains...etc.,. Hence, while taking credit for the taxes paid in India how do I go about?.   It seems in the US tax return, to take credit for taxes paid in India, I have to specify how much tax paid for which account. Am I right?   If so, it will be impossible to do it and I will be subjected to "Double taxation"
  2. Also, Govt. of India pays Interest on any excess taxes paid over the actual final tax liability per tax return calculations and where should I show that interest income. Do I need to show it under Interest income section? Just to highlight, It is not income from a Bank or financial institution where there is an account kept but by the Govt. of India tax department for interest earned due to excess tax payment. 

Thanks in advance for your help in this matter. 

RG2K
Level 2

Where do I enter foreign income tax paid on interest earned in a foreign country?

@girigiri 

     Answering one of your questions but also checking how you ended up filing:

 

1. For INDIA interest paid by banks, as we all know, you will not get any 1099-INT. So as a filer it will be your responsibility to get the actual interest paid by INDIA banks to you. Now to do that, one needs to look at their bank account statements and look for any interest line items and add them up. Usually I like to keep a yearly (US financial year) spreadsheet of all my INDIA income (e.g bank accounts, rental, etc.) , account MAX balance (during any time of the year), the interest they earned and any tax that was deducted at source (TDS). I then use this sheet to complete my US tax returns and also keep it for my records (along with statements, etc).

 

2. For the interest earned on INDIA tax refund, I would assume that it will get added as an income to the US taxes. Also I assume it should be shown at income in the year it hits your bank account in INDIA. 

 

Having said above, please do share how you handled your tax situation, as it will help me and others learn. 

    

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