Foreign Tax Credit Carry over

[zoilomd]

Hi,

My client has foreign tax credit carry over for 2022 from prior years.  This foreign tax credit arose from her foreign source wage income.  Starting 2022, she has no foreign source income and all her income are within the US.  In previous years, she filed Form 1116 to claim foreign tax credit. 

My question is how can she claim the foreign trax credit carry over in 2022 and succeeding tax years.

Hoping for your assistance on this.

Thanks,

Zoilo

[PhoebeRoberts · Accepted solution]

Sounds like she's unlikely to ever get a benefit from those foreign taxes.

[zoilomd]

Hi Phoebe,

Thanks a lot for your quick reply!

Zoilo

[Norman2001]

She can have foreign income from investments such as ETFs and mutual funds.  Quite often these receive foreign income and pay foreign taxes.  

[itonewbie]

If your client has FTC carryover from foreign employment/assignment, likelihood is he/she may travel on business overseas.

Ask your client to track those days as it could generate sufficient foreign-source income to utilize those credits - whether your client could benefit would depend on the number of foreign workdays and your fees for preparing F.1116.  In case your client was on assignment and was tax equalized/protected, however, most companies' policies would require tax benefits from these carryover to be paid back.

Of course, there's no telling whether your client will be on assignment again before those carryovers expire.  Those credits can come in handy if they ever move to a lower tax jurisdiction.

[zoilomd]

Hi sir,

Thanks for your reply sir.  Yes, my client has tax equalization program with her former employer.  I will inform her if their tax equalization program includes paying back those  tax credit carryovers.

Thanks a lot, again.

Zoilo

[zoilomd]

Hi Norman

Thanks for your quick reply and we consider this already and the client don't expect to have these type of transactions.

Thanks a lot!

Zoilo

[itonewbie]

@Norman2001 FTC from foreign employment is in the General Limitation basket whereas foreign taxes paid on investment income are normally in the Passive basket.  FTC's in these baskets don't mix.