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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (46763)	2/27/2012 1:08:49 AM
From: Paul Senior	Read Replies (1) \| Respond to of 78517

Foreign tax credit: "I also found out i didnt get a credit for the full amount of taxes paid. only a percentage." I found that to be true in my situation also. For small players, the last time I looked (2010) I concluded: Form 1116 can be ignored if your total creditable foreign taxes are $300 or less ($600 or less on a joint return) and you meet certain other requirements. You just had to put that foreign tax credit amount on line 47 of p. 2 of the 1040, and that was it. The person/couple got the full credit against their taxes. (Assuming of course the person/couple's tax for the year was over $300/$600.) For foreign taxes withheld totaling over $600 for joint return filers (my situation), if I want the credit applied directly against my taxes (as opposed to just taking a deduction for the amount of foreign taxes withheld), then I have to complete Form 1116. And you only get the full credit applied to your tax amount if you have foreign income in a ratio to overall income that's deemed acceptable by the USA's Internal Revenue Service. If this income ratio test isn't high enough (or maybe low enough ---not sure which--- it's all a black hole to me ---- my accountant's computer does the numbers), the unused (unapplied) foreign tax can be carried over to future years for an offset to USA taxes in those future years. In my case, I've had withheld foreign taxes in excess of $600 in each of the past few years. I notice that I'm in my third year of carry-overs and of not having my foreign taxes fully recouped. That carried-over amount is increasing each year. So in my experience, it is not a given that the foreign tax is recouped 100% very easily or quickly.