Can I deduct on my US tax return inheritance tax paid to Germany?

[PhyllisG · Accepted solution]

A decedent’s citizenship at the time of their death will determine whether you pay U.S. or German inheritance tax. If the decedent was a German citizen, you will pay taxes according to German law. However, in order to avoid double taxation, you can deduct the amount of inheritance tax you pay to the German government on your Form 1040.

You can either deduct the amount on the Form 1040, Schedule A.pdf or as a credit on the Form 1116.pdf . Generally, it is best to take a tax credit because it is dollar for dollar as opposed to a deduction which only reduces your tax according to your income tax bracket.

To begin entering the inheritance tax into TurboTax do the following:

• Type foreign taxes in Find
• Click the Jump to foreign taxes link

Begin navigating through the prompts, it will give you options on how to claim the credit.