Form 1116, 1099-INT, and the foreign tax credit. Thank you!

[1967jeff1967jeff]

Hello, and thank you for considering my question.

I have a bank account in Sweden.  In 2019 I entered my Swedish bank interest income in the Interest on 1099-INT section.  It totaled less than $300.  I then entered taxes withheld on that interest and had no trouble getting the foreign tax credit for it.

For 2020, my Swedish bank interest exceeded $300.  That, I believe, activates form 1116.  So I'm being prompted to enter my foreign tax paid information into its form 1116 worksheet.  So far, so good.  But then the program is denying me any of the foreign tax credit.  Is that because I put the Swedish bank interest in the Interest on 1099-INT section?  Do I need to put the interest income in the 1116 worksheet instead in order to get the foreign tax credit, or perhaps do something else?

Thanks again most sincerely for reading!

[rogge1722]

I suggest going thru the interview instead of entering data directly into the worksheet.  Here is the path:

Deductions and Credits, Estimate and Other Taxes Paid, Foreign Taxes

[1967jeff1967jeff]

Thank you, rogge1722, for your kind reply. 

I did as you recommended, but unfortunately the "Your tax breaks" screen in Turbo Tax still shows that I get $0 in foreign tax credit for 2020.

When I was going through the interview screens as you suggested, it seems like I wasn't given the opportunity to enter the interest income that applies to the foreign tax paid.  So I could see how Turbo Tax would think that since there was no income associated with foreign tax paid, I shouldn't get any foreign tax credit.  Hmmm.

Another thing happened as I re-went through the interview screens.  A "First Year You are Eligible?" screen popped up giving me three choices related to some sort of "Simplified Limitation Election Eligibility."  I have no idea what to choose.

But again, the big issue is how to get the foreign tax credit.  Perhaps someone else could help.

I'm grateful for your having read about my issue.  Thank you!

[AnnetteB6]

As long as the foreign taxes paid does not exceed $300 for a Single taxpayer, then you should be able to claim the foreign tax credit just as you have in the past without needing to fill out the Form 1116.

Your interest income and the foreign taxes paid on that income will be entered in the Form 1099-INT section of your return.  Then, you will go through the foreign taxes section after that.  

For more information, take a look at the following TurboTax articles: 

Where do I enter for foreign tax credit (Form 1116) or deduction for 2020?

Filing IRS Form 1116 to Claim the Foreign Tax Credit

@rogge1722

[1967jeff1967jeff]

My sincere thanks to you, AnnetteB6; as well as to rogge1722 for the earlier answer.  The problem is solved and I credit you both for that success.

I appreciate your having considered my questions, very much.  Thank you both!

[ajaybuti]

I have less than $276 in foreign tax on earned interest but it is still populating Form 1116 and showing a tax credit of $111 on Schedule 3. IMHO, the tax credit should be $276. Any pointers will be appreciated.

[LoganathanB]

As long as the foreign taxes paid does not exceed $300 for a Single taxpayer, ( $600 for married filing jointly) then you should be able to claim the foreign tax credit just as you have in the past without needing to fill out the Form 1116.

Enter your interest income and the foreign taxes paid in the Form 1099-INT section of your return.  Then, follow the instructions in the foreign taxes section.  

Click on the link for more information, 

Where do I enter for foreign tax credit (Form 1116) or deduction for 2020?

Filing IRS Form 1116 to Claim the Foreign Tax Credit