Foreign-Source Income for Vanguard VXUS

[johnsantaclara1]

I am still confused about what to enter for foreign-source income for Vanguard.

I have had 3 funds in Vanguard in 2021  (VTI, VXUS and VWLUX) out of which only VXUX had "Foreign tax withheld-Various"

"VXUS Dividends+distributions"=$8000,

"total dividends+distributions"=16000,

Box 1a (Total Ordinary Dividends in 1099-DIV)=$15000

Box 1b (Total Capital Gain distributions in 1099-DIV)=$1000

Vanguard tax form did not provide foreign source income, but provided below:

FOREIGN SOURCE INCOME PERCENTAGES
Fgn Source Inc Tot 90.34% Fgn Source Inc Qual 64.50%

Turbo Tax "Foreign-Source Income" screen says : You reported $16000 of total iincome from Vanguard. How much of this income was from foreign countries?

Question:

Which of the following should I provide for Foreign source income?

Option 1)  (Total Dividends+distributions*90.34%) = (16000*90.34/100) or

Option 2) (Box 1a*90.34%) = (15000*90.34/100) or 

Option 3) (VXUX Dividends+distributions*90.34%) = (8000*90.34/100) ?

Thanks a lot!

[DavidD66 · Accepted solution]

You should use option 3, VXUS Dividends & distributions ($8,000 * 90.34%).  

[platenscrews]

DavidD66, I have seen you answer this question two different ways. 

https://ttlc.intuit.com/community/taxes/discussion/vanguard-foreign-qualified-dividends-and-l-t-capi...

The link above shows you using the lower percentage. The .645 noted as Foreign Source Income Qualified. 

But here you are recommending the higher percentage of .9034. Can you please clarify?

[DaveF1006]

It depends. This has two different types of dividends, ordinary dividends reported in Box 1A and qualified dividends reported in Box 1B.  Here is how to determine the total amounts of your foreign dividends.

1.  Multiply ($15,000)(.9034) =$13,551
2. Multiply ($1,000)(.6450)=            645
3. Total Foreign Dividends       $14,196  This is the total amount of foreign dividends paid.

[jrodbx]

I also have this same question, and I'm wondering if the previous response might be a case of double counting?

The number in box 1a (ordinary = nonqualified + qualified) includes the amount in box 1b (qualified), whereas the percentages were described "Fgn Source Inc Tot." 90.34% and "Fgn Source Inc Qual" 64.50%.

Which leads to think applying 90.34% to the total dividend amount is the correct answer.

[MarilynG1]

When reporting the amount of Foreign Dividends in the Foreign Tax Credit section, you're not reporting the income again (it's already reported in the dividend section).  The amount you enter in the FTC section is just to relate the foreign tax paid with an income amount (no double counting). 

The FTC is a complex calculation and includes many items on your overall return.  The goals is to reduce your US tax for the foreign tax you paid, Any foreign tax credit you can't take (again, per the calculations), is carried over. 

Here's more info on Claiming the Foreign Tax Credit.

@jrodbx