Could I claim foreign tax credit paid on foreign rents? if so, should I enter as expenses, depreciation expenses on Form 1116 ?

[itonewbie · Accepted solution]

Yes, you can.  It's in the passive basket but subject to high tax kick-out.  Rental expenses are directly allocable for FTC purposes.  But very often, you would end up with a loss and not having any limitation to claim the credit on because of SLL/OFL.

[itonewbie]

If you don't like the answer, you are probably doing it wrong and should read up on the topics highlighted in the response.

[andreactamayo]

I’m sorry. I didn’t mean to be rude. I really appreciate your answer.

[itonewbie]

Not a problem, @andreactamayo.  Just want to make sure you are aware of the critical factors to consider.

[andreactamayo]

It’s a complex topic. It’s my first time calculating this credit,  so I’m trying to find a simple example to understand better what calculations should I do. Do you know where can I find an example for rents ?

[itonewbie]

I don't know if you'd find any example for rent but FTC is a complex topic.  If you have not already, you should study in details Pub 547 and the instructions for F.1116.  You will learn a lot from these readings and various concepts are explained - although these are still difficult reads, it'd be worth the while.

In case you are not comfortable preparing returns with international elements, at least for now, you would be well advised to farm the return out to someone who is more experienced in this area.

[Marc-TaxMan]

I don't understand what @itonewbie said, but I believe him:  https://proconnect.intuit.com/community/Discussions-Tax-Reform/Meet-Our-AllStars-itonewbie/m-p/1194#...

[itonewbie]

Thanks for the props, @Marc.TaxMan