Foreign tax credit

[Plidskog]

Starting this year, I am getting retirement payments from a foreign country. These payments are taxed in this country. How does it affect my US taxes?

[Opus 17]

If you are a US citizen or green card holder, you must file a US tax return that reports and pays income tax on all your world-wide income, no matter where you are actually living and no matter what country the income comes from.  If that income is also taxed in a foreign country, you can claim a deduction or credit on your US tax return for the foreign taxes you paid on the same income.

For example, if the foreign tax on your pension would be $10,000 and the US tax would be $15,000, you can claim a $10,000 credit on your US tax return that reduces your US tax to $5000.

[Plidskog]

Thanks for your response. It is likely that the foreign tax paid will be higher than the US tax liability. Can I get a credit larger than the US tax liability?

[Opus 17 · Accepted solution]

---

@Plidskog wrote:

Thanks for your response. It is likely that the foreign tax paid will be higher than the US tax liability. Can I get a credit larger than the US tax liability?

---

No, you can't get a refund from the US if the other country charges more.  If the foreign tax is $20,000 and the US tax on the same income would be $15,000, the maximum credit on your US tax return would be $15,000.