Aron Govil: How to claim the Foreign Tax Credit on your US taxes
If you have paid foreign taxes on income you earned in a foreign country, you may be able to claim a tax credit on your U.S. tax return says Aron Govil. This credit can reduce your U.S. tax liability by the amount of foreign taxes you paid.
There are several rules that must be met in order to claim the Foreign Tax Credit, and there are also specific forms that must be used to calculate and report the credit.
This article will explain how to determine if you qualify for the credit, and how to claim it on your tax return.
Who Can Claim the Credit?
In order to claim the Foreign Tax Credit, you must be a U.S. citizen or a resident alien of the United States. You must also have paid foreign income taxes on income earned in a foreign country. The credit is not available for taxes paid to a foreign government on income that was earn in the United States.
How Much Can You Claim?
The amount of the Foreign Tax Credit you can claim is base on the amount of foreign taxes you paid, less the U.S. tax that was withheld from that income. The credit can be claim for up to 100% of the foreign taxes paid.
What Forms Must Be Used?
There are two forms that must be used to calculate and report the Foreign Tax Credit: Form 1116 and Form 1040. The Form 1116 is used to figure the credit, and Form 1040 is used to report the credit on your tax return says Aron Govil.
Form 1116
Form 1116 is use to figure the amount of the Foreign Tax Credit you can claim. To complete this form, you must provide the following information:
- Your total foreign income
- The amount of foreign taxes paid on that income
- The U.S. tax that was withhold from that income
- The amount of the credit you are claiming
Form 1040
Form 1040 is use to report the Foreign Tax Credit on your tax return. To complete this form, you must provide the following information:
- Your total taxable income
- Your total foreign taxes paid
- The amount of the credit you are claiming
FAQs:
Q: I paid foreign taxes on income I earned in two different countries. Can I claim the credit for both countries?
A: You can only claim the credit for foreign taxes that were paid on income that was earn in a single country. If you paid taxes in two different countries. You must figure the credit separately for each country.
Q: I am a U.S. citizen, but I live and work in a foreign country. Do I still qualify for the Foreign Tax Credit?
A: Yes, you may still be able to claim the Foreign Tax Credit if you meet all of the other requirements. However, you may not be able to claim the credit for taxes pay to a foreign government on income that was earn in the United States.
Q: I am a resident alien of the United States, but I live and work in a foreign country. Do I still qualify for the Foreign Tax Credit?
A: Yes, you may still be able to claim the Foreign Tax Credit if you meet all of the other requirements. However, you may not be able to claim the credit for taxes paid to a foreign government on income that was earn in the United States.
Q: I have a foreign bank account. Must I report the account information on my tax return?
A: If you have a foreign bank account, you must report the account information on Form 8938. Statement of Specified Foreign Financial Assets explains Aron Govil. This form is use to report certain foreign financial assets, including foreign bank accounts. For more information, see the Instructions for Form 8938.
Conclusion:
The Foreign Tax Credit is a credit that can be claim. For foreign taxes paid on income earned in a foreign country. To claim the credit, you must be a U.S. citizen or resident alien. And you must have paid foreign taxes on income earned in a foreign country. The amount of the credit you can claim is base on the amount of foreign taxes paid, less the U.S. tax that was withheld from that income. The credit can be claim for up to 100% of the foreign taxes paid. There are two forms. That must be use to calculate and report the Foreign Tax Credit: Form 1116 and Form 1040.