Article: 50004

If you paid or accrued foreign taxes to a foreign country or US possession and are subject to US tax on the same income, you may be able to take either a credit or an itemized deduction for those qualifying foreign taxes. Generally, only income, war profits, and excess profits taxes qualify for the credit.

You might not need to file Form 1116 if you meet all of the following:

• Your total foreign tax paid for the year is $300 or less, or $600 or less if filing jointly
• The foreign tax is reported on Form 1099-DIV or 1099-INT
• The income is passive in nature, like interest or dividends
• The tax was not paid to a country subject to U.S. sanctions or boycotts

If you do not meet all of these conditions, you must file Form 1116 to claim the credit.

Form 1116

To complete Form 1116, do the following:

• Click Federal Taxes > Review, and then click I’d like to see the forms I’ve filled out or search for a form.
• In the search bar, enter 1116.
• Click Add form beside Form 1116 Foreign Tax Credit.

Foreign Form 1099-DIV

If you do not require Form 1116 to claim the Foreign Tax Credit on your 1099-DIV, you can elect to prevent it from being generated on your return by following these steps:

1. Click Federal Taxes > Review.
2. Click I’d like to see the forms I’ve filled out or search for a form.
3. In the search bar, search 1099-DIV and click it to open and add the form.
4. Enter your dividend information as it applies to you.
5. When you reach the section labeled Foreign Tax Credit, you will be asked, Are you eligible to take the Foreign Tax Credit without completing Form 1116?
6. If you are, select Yes, then enter information for the portion of your dividend income that was from a foreign source.
7. Fill out this information as it applies to you.

   If your total foreign tax was more than $300 ($600 for Married Filing Joint), you’ll need to complete Form 1116 to claim the credit instead.

8. Once you have completed the form, click Save.

If you see an error when you are completing Form 1099-DIV, you will need to remove the amount from the 1099-DIV screen and enter the details on the 1116 screen. This is because you must enter both the foreign income and foreign tax amounts. There is no place to enter foreign income on the 1099-DIV screen. In this circumstance, you must use the 1116 screen instead. Once you enter this information on the 1116 screen, you will need to remove this information from the 1099-DIV forms.

Foreign Form 1099-INT

1. Click Federal Taxes > Review.
2. Click I’d like to see the forms I’ve filled out or search for a form.
3. In the search bar, search 1099-INT and click it to open and add the form.
4. Enter your interest information as it applies to you.
5. When you reach the section labeled Foreign Tax Credit, you will be asked, Are you eligible to take the Foreign Tax Credit without completing Form 1116?
6. If you are, select Yes, then enter information for the portion of your interest income that was from a foreign source.

   If your total foreign tax was more than $300 ($600 for Married Filing Joint), you’ll need to complete Form 1116 to claim the credit.

7. Once you have completed the form, click Save.

Schedule B – Carryover Reconciliation

1. Click Federal Taxes > Review, and then click I’d like to see the forms I’ve filled out or search for a form.
2. In the search bar, enter Form 1116.
3. Click Add form beside Form 1116 – Schedule B – Foreign Tax Credit Carryover Reconciliation.

Schedule C – Foreign Tax Redeterminations

To add Form 1116, Schedule C Foreign Tax Redeterminations, do the following:

1. Click Federal Taxes > Review, and then click I’d like to see the forms I’ve filled out or search for a form.
2. In the search bar, enter Form 1116.
3. Click Add form beside Form 1116 – Schedule C – Foreign Tax Redeterminations.

Schedule K-3

Schedule K-3 is an extension of Schedule K-1 and is used to report foreign transactions or activities. The information on Schedule K-3 is used to completing Form 1116 and claim the foreign tax credit. For more information, see the 1116 Instructions.

Resources

• IRS Form 1116 Instructions
• IRS Foreign Tax Credit Information page