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How do you calculate foreign income (for foreign tax credit) when dealing with ETFs?

Forum|Forum|2 years ago
March 12, 2024
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Thanks for any help. TT asks for total foreign income and total foreign qualified income when calculating the foreign tax credit. My 10099 statement doesn't indicate which stocks or ETFs have foreign income, only which ones have foreign taxes withheld. I know some of my ETFs have foreign stocks in their portfolio.

A couple questions:

1) How does the total foreign income and qualified income affect my taxes? Does it only impact the % of my foreign tax withheld that I get a credit for?

2) How do I calculate total foreign income from my 1099 for ETFs?

Thanks, much appreciated

Not A Product Question

Best answer by DaveF1006

It depends. In this context, foreign income and foreign qualified income is the same since it originates from your stocks or ETF's in your portfolio. The income is already reported in your dividend or interest statements and you are only interested in income that have foreign taxes withheld for the purpose of calculating the foreign tax credit. You do not need to identify which stocks or ETF have foreign income.

In your case, you do not need to calculate total foreign income from your 1099 for ETFs because you are only interested in income that had foreign taxes withheld. Since you mentioned that this was disclosed to you, you do not need to do anything additional.

Your foreign tax credit is derived from taking a ratio between your foreign income that had foreign taxes withheld and your total income for the year. The ratio is then multiplied by your US tax liability for the year to determine your foreign tax credit.

DaveF1006Answer

It depends. In this context, foreign income and foreign qualified income is the same since it originates from your stocks or ETF's in your portfolio. The income is already reported in your dividend or interest statements and you are only interested in income that have foreign taxes withheld for the purpose of calculating the foreign tax credit. You do not need to identify which stocks or ETF have foreign income.

In your case, you do not need to calculate total foreign income from your 1099 for ETFs because you are only interested in income that had foreign taxes withheld. Since you mentioned that this was disclosed to you, you do not need to do anything additional.

Your foreign tax credit is derived from taking a ratio between your foreign income that had foreign taxes withheld and your total income for the year. The ratio is then multiplied by your US tax liability for the year to determine your foreign tax credit.

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