Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

A married couple has a foreign tax credit carryover from…

A married couple has a...
A married couple has a foreign tax credit carryover from 2014. How can this credit be utilized as an offset against their regular current tax or tax in the future?
Show More
Show Less
Ask Your Own Tax Question
Answered in 20 minutes by:
3/9/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,719
Experience: Taxes, Immigration, Labor Relations
Verified

A foreign tax credit carryover may be ONLY used against US tax liability on the foreign sourced income.

If, because of the limit on the credit, you cannot use the full amount of qualified foreign taxes paid or accrued in the tax year, you are allowed a 1-year carryback and then a 10-year carryover of the unused foreign taxes.

This means that you can treat the unused foreign tax of a tax year as though the tax were paid or accrued in your first preceding and 10 succeeding tax years up to the amount of any excess limit in those years.

Questions?

Ask Your Own Tax Question
Customer reply replied 1 month ago
Is this a catch 22 situation? The foreign source income is usually taxed by the foreign country, then your taxed in the U.S.
a second time, so how can you get to use this credit? What can one invest in that would not be taxed by the foreign country , so then you could pay the tax in the U.S and use the credit carryover to offset it. Am I on the right track?
Second question on this topic, if you have a large credit , how do you arrive at the amount of the credit you are able to offset against your regular tax?

Is this a catch 22 situation?

In some circumstances - yes.

But a foreign source income may be taxed higher or lower in a foreign country.

Some foreign sourced income might be excluded from taxation in a foreign country - but still taxable in the US.

It depending on your foreign country - if it is always taxed higher - chances are - you will not use the full carryover credit.

In this case - you might consider a foreign tax deduction instead of claiming a credit.

if you have a large credit , how do you arrive at the amount of the credit you are able to offset against your regular tax?

If you carry unused foreign taxes to a year in which you chose to deduct qualified foreign taxes, you must compute a foreign tax credit limit for the deduction year as if you had chosen to credit foreign taxes for that year.

If the credit computation results in an excess limit (as defined earlier) for the deduction year, you must treat the unused foreign taxes carried to the deduction year as absorbed in that year.

You cannot actually deduct or claim a credit for the unused foreign taxes carried to the deduction year.

But, this treatment reduces the amount of unused foreign taxes that you can carry to another year.

Ask Your Own Tax Question
Customer reply replied 1 month ago
Lets see if I understand this,
If you decide to take a deduction for the credit carry forward,you had, you might be limited based on the foreign tax credit computation, but you still will be able to carry forward the unused portion of the carryover that was not utilized
Did I get it?
Where would I find these limit computations? Are they on the form 1116? If yes, where?

That is not correct interpretation...

You may NOT deduct the credit carry forward...

but you may choose to DEDUCT foreign taxes instead of claiming a credit.

If you do so - you will deduct the full amount and nothing to carry forward.

As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes.

If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. You cannot deduct any of them.

Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. You cannot take a credit for any of them.

To choose the deduction, you must itemize deductions on Form 1040, Schedule A.pdf.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,719
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 1 month ago
Got it now
Thank you so much
Was this answer helpful?
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,719
32,719 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,451 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

56 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,124 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
Is there a deduction for using IRA funds to make a divorce
Is there a deduction for using IRA funds to make a divorce settlement payment? … read more
Bill
Bill
Master's Degree
2,278 satisfied customers
Lev. I have a question regarding line 2 of Form 1116 for
Hi Lev. I have a question regarding line 2 of Form 1116 for expenses definitely related to passive rental income. On a year in which the depreciation and other expenses exceed the total income - and t… read more
Lev
Lev
Tax Advisor
32,719 satisfied customers
Can insurance premium payments be used as a deduction? 2017.
Can insurance premium payments be used as a deduction? … read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
May I have a question of foreign tax credit calculation,
May I have a question of foreign tax credit calculation, pls?If a individual has $20,000 foreign general income, $500 foreign passive (interest) income and $1000 foreign capital loss. The foreign tax … read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
How to report foreign income on which Tax has been withheld
How to report foreign income on which Tax has been withheld in foreign country and tax return in the country is filed as per their rules. … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Are hearing aids deductable, no I'm using turbo tax, on my
are hearing aids deductable JA: Have you talked to a tax professional about this? Customer: no I'm using turbo tax JA: Are you using TurboTax online? Or software installed on your computer? Customer: … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
For 2018, what is the income limit to be able to deduct
for 2018, what is the income limit to be able to deduct rental losses … read more
Lev
Lev
Tax Advisor
32,719 satisfied customers
I am having trouble understanding foreign tax credits,
I am having trouble understanding foreign tax credits, Hopefully in simple language you can help me understand it. I have a carryforward foreign tax credit from a sale of property in Israel. I paid th… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
TRYING TO GET CREDIT FOR FOREIGN TAXES PAID IN CANADA FOR A
TRYING TO GET CREDIT FOR FOREIGN TAXES PAID IN CANADA FOR A CANADIAN COMPANY. HAVE ENTERED ALL OFTHE INFORMATION ASKED FOR FROM 1099-DIV FROM FIDELITY INVESTMENTS. BUT I AM NOT GETTING A CREDIT. HELP?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,948 satisfied customers
Can you deduct travel costs to get medical care in a foreign
Can you deduct travel costs to get medical care in a foreign country? And is the medical care ?… read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
Travel for medical using cab or Uber is deducted using the
Travel for medical using cab or Uber is deducted using the full cost and not mileage on Schedule A, is that correct?… read more
Carter McBride
Carter McBride
LLM
967 satisfied customers
Tax deductions. Can i deduct the conversion on my income
tax deductions JA: The Accountant will know how to help. Please tell me more, so we can help you best. Customer: can i deduct the conversion on my income taxes JA: Is there anything else the Accountan… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Taxes Where doe do you report foreign source income from a
TaxesWhere doe do you report foreign source income from a 1099-div There are amounts in boxes 1a-6 that I already entered in Schedule B and the dividend income statement. I entered the Foreign tax pai… read more
Lev
Lev
Tax Advisor
32,719 satisfied customers
If you had a foreign tax credit carryover from 2014 and you
if you had a foreign tax credit carryover from 2014 and you had no foreign income in 2017 , could you use the foreign tax credit in 2017 to offset your regular tax liability… read more
Barbara
Barbara
Enrolled Agent, Paralegal
4,948 satisfied customers
Continuing our discussion on foreign tax credits. I have
Continuing our discussion on foreign tax credits. I have land in a foreign country, Israel and I intend to sell it and I will be heavily taxed on it and will incur a foreign tax. I will have to report… read more
Lev
Lev
Tax Advisor
32,719 satisfied customers
On my taxes (at my option) I can either use $4,000 deduction
on my taxes (at my option) I can either use $4,000 deduction or $2,000 credit for my tuition expenses. For IRS it is more benefitfor me to use $2,000 credit and for my state income tax it is more bene… read more
Dr. Fiona Chen
Dr. Fiona Chen
President
Ph.D.
938 satisfied customers
Turbo tax suggested using standard deductions because of
turbo tax suggested using standard deductions because of lack of deductions (return of $1867). I reviewed my deductions and found two I missed, this increased my return to $2963. Some how the standard… read more
Fred Rook
Fred Rook
Corporate Controller
BSBA
125 satisfied customers
My question is: Is the foreign tax credit 100% Offset to the
Hi, my question is: Is the foreign tax credit 100% Offset to the Alternative Minimum Tax, if there are only foreign income? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,124 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x