Reply To: Foreign Tax Credit

Home Fairmark Forum Taxation of Investments Foreign Tax Credit Reply To: Foreign Tax Credit

#2022
kaneohe
Participant

Like most things…….it depends. https://fairmark.com/investment-taxation/mutual-fund-tax-guide/foreign-tax-paid/

If your foreign tax (FT) for all your income is less than 300 (600 if MFJ), then the simplified method in the link applies and you get to take the full credit for the foreign taxes you paid.

If your FT exceeds those limits above, you need to calculate your credit using F1116. In the typical case you compare the foreign tax you paid against the US tax you paid on the same amount of income as the foreign income. If you go through F1116, the calculation in the simple cases does not distinguish between qualified dividend taxation and normal taxation. It basically gets an effective tax rate on all your income and applies that to the foreign income. You then get credit for the lesser of the foreign tax or the US tax on that income using that effective rate.

  • This reply was modified 2 years, 8 months ago by kaneohe.