How to File Form 1116 with Adjustments for Foreign Qualified Dividend Income
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- เผยแพร่เมื่อ 4 ส.ค. 2023
- For other videos on the Foreign Tax Credit and Form 1116:
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Form 1116 and Form 1099-DIV: • IRS Form 1099-DIV with...
Form 1116 with Foreign Compensation: • How to File IRS Form 1...
Form 1116 is filed by U.S. taxpayers to report foreign source income and claim a foreign tax credit against their U.S. tax liability.
In general, a taxpayer reports their gross foreign source income on Line 1a of Form 1116. However, if a taxpayer has foreign source qualified dividend income and/or foreign source long-term capital gains, they may be required to adjust their foreign gross income amount on Line 1a.
In this example, a U.S. taxpayer has a large amount of foreign qualified dividend income, which requires an adjustment on Line 1a of Form 1116. The amount of the adjustment will depend upon the effective U.S. tax rate for the income (0%, 15%, or 20%) on the qualified dividends and long-term capital gains. The taxpayer also adjusts their Line 18 total taxable income amount.
The impact of the reduction in foreign gross income will reduce the maximum available credit on Form 1116 (Line 21).
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This was extremely helpful when I was doing my 2023 taxes; thanks!
Thank you !! I’ve been looking for this explanation!! You’re awesome!!
Glad it was helpful!
perfect perfect perfect !!!!!! thank you so much for your explanation.
Glad it helped!
Thank you so much for this video, it helped me a lot with my Form 1116. But I am wondering, why in the calculation for line 1a is the Foreign Source Amount of Non Qualified Dividends higher than the Total (US and Foreign) Amount of Non Qualified Dividends? Shouldn't the Foreign Source Amount be less because you are taking the US portion out? Or is there something about the way the Foreign Source Income Qualified Percentage is figured that explains the discrepancy?
Thank you, Jason! I've been reading numerous messages on the Bogleheads website about this adjustment, but only got more confused. Your video was straight-forward and very informative.
My one question is -- you show the total (U.S. and foreign) non-qualified dividends of $16,170, but after calculating the foreign source amount of each income type (ordinary, qualified, non-qualified), the non-qualified FOREIGN source income is $24,542, which technically means that the U.S. portion of the non-qualified income is negative $8,372 ($24,542 less $16,170), which of course is not technically true.
Is it OK to have this strange/weird issue when doing this calculation?
Thanks again.
How do you decide your qualified dividend rate is 15%? Not 0% or 12%?
Thank you for the great video. One follow up: If all the foreign sourced dividends are qualified and are taxed at the 0% rate, is the taxpayer still able to use the foreign tax credit to offset other taxes? Thank you!
Can you cover the income from a Foreign Trust ? Thx🍻👏👏👏
I think you made a mistake on F1116, Line 3d. The instructions state for Lines 3e and 3e that you must "include those amounts WITHOUT REGARD TO ANY ADJUSTMENTS". You did this for John in line 3e (Gross Income for all sources, $300589). However, you use the adjusted amounts for gross foreign income of $46328 instead of the unadjusted amount of $78282, for line 3d. Thus, line 3g and Line 6 (F1116) are understated, with the actual number being around $3373.
I was just thinking that he did have 3d incorrect. And then I saw your comment. Hopefully he will answer as the IRS does say without regard to any adjustments