Form 1116 Simplified Limitation Election for AMT question

[johnsantaclara1]

Hi there,

I had foreign tax credit only due to VXUS from Vanguard. Hence I had submitted 1116 for 2021 with foreign tax credit of 490. I don’t remember choosing Simplified limitation election and I see the following question in my Turbo Tax interview this year.

My VXUS has Total Dividends & distributions of 7,945.09 and -623.84 Total Foreign tax withheld and 624 foregin tax credit for 2022.

Please advise what exactly should I look for in my previous tax return to confirm if I used Simplified limitation and what would be the best choice this year. Thank you.


“Simplified Limitation Election for AMT

We’ve reported your interest, dividends, and Schedule K-1 entries from each county. We need to ask you about AMT.

Your 2021 return shows that you previously decided to use your regular taxable income and deductions on the Form 1116 you filled out for AMT purposes. This is called using the Simplified Method. You must continue to use this method unless you have received written permission from the IRS to change.

Do you want to use the Simplified Method for 2022?”

[DaveF1006]

To be eligible for the The Simplified Election,  qualified foreign taxes must be $300 ($600 if MFJ) or less. In addition,  all foreign source income must be  passive category income (such as interest and dividends) and taxpayer meets the other requirements as explained in Instructions for Form 1116.

If your foreign tax credit was more than the parameters described above, or if you had a Form 1116 in your return last year, then you more than likely used the general method. Unfortunately, there is nothing on a Form 1116 or Form 1116 AMT that indicates what method you actually used.

Just an FYI, unless you have an situation where do need to pay AMT this year, this information is not critical to your return.

This year since your foreign taxes are over the amounts listd above, I would suggest you answer no regarding the simplified election question.

@johnsantaclara1