Form 1116 - Foreign Tax Credit Under Threshold is Not Needed

Per IRS Instructions for Form 1116 Foreign Tax Credit (Individual, Estate, or Trust), page 1:

Election To Claim the Foreign Tax Credit Without Filing Form 1116

You may be able to claim the foreign tax credit without filing Form 1116. By making this election, the foreign tax credit limitation (lines 15 through 21 of the form) won't apply to you. This election is available only if you meet all of the following conditions.

  • All of your foreign source gross income was “passive category income” (which includes most interest and dividends). See c. Passive Category Income, later. However, for this purpose, passive income also includes (a) income subject to the special rule for High-taxed income described later, and (b) certain export financing interest.
  • All the income and any foreign taxes paid on it were reported to you on a qualified payee statement. Qualified payee statements include Form 1099-DIV, Form 1099-INT, Schedule K-1 (Form 1041), Schedule K-1 (Form 1065), Schedule K-1 (Form 1120-S), or similar substitute statements.
  • Your total creditable foreign taxes aren't more than $300 ($600 if married filing a joint return).

This election isn't available to estates or trusts.

To make the election, just enter on the foreign tax credit line of your tax return (for example, Schedule 3 (Form 1040) Additional Credits and Payments, Line 6) the smaller of (a) your total foreign tax, or (b) your regular tax (for example, the total of Form 1040 U.S. Individual Income Tax Return, Line 15 and Schedule 2 (Form 1040) Additional Taxes, Line 8.

Note. Form 1116 Foreign Tax Credit will not print with your return if it is not necessary.

For interest and dividend income, please see the Investment Income section of the Federal Q&A.

If, in the Q&A interview for Form 1116, you re-entered manually any information that already flows automatically from qualified payee statements, you can delete those entries.

To delete the payee statement entries:

  1. From within your TaxAct return (Online or Desktop), click Federal (on smaller devices, click in the top left corner of your screen, then click Federal).
  2. Click the Other Credits dropdown, then click Foreign tax credit.
  3. Click Review next to Manual Input Worksheet, and continue with the interview process until you reach the screen titled Foreign Tax Credit - Manually Entered Worksheets.
  4. Click the trash can icon on the item you want to delete, then click OK to confirm (desktop program: click Yes).

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the webpage or document at the time it is accessed.