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Foreign Tax Credit - Form 1116

Individuals, estates, and trusts can file Form 1116 to claim the Foreign Tax Credit if they paid or accrued certain taxes to a foreign country or U.S. possession. Generally speaking, nonresident aliens are not eligible to take the credit.

Note that individuals may be able to claim the Foreign Tax Credit without filing Form 1116 if their foreign income was “passive category income,” all the income and any foreign taxes paid on it were reported on a qualified payee statement, and their total creditable taxes are less than $300 ($600 if married filing jointly).

Those who do file Form 1116 can choose to deduct foreign income taxes rather than claim a credit for eligible foreign taxes, but you must itemize deductions. Generally speaking, you cannot deduct any foreign taxes for which you have already taken a credit.

Not all foreign taxes are eligible for the credit. Check the Instructions for Form 1116 to ensure that your foreign taxes are eligible.

Take note that those subject to the Alternative Minimum Tax (AMT) may have to make a separate calculation of the Foreign Tax Credit.