Claim foreign taxes paid as a credit vs deduction (Schedule A)
You can deduct the foreign taxes paid on Schedule A or calculate the Foreign Tax Credit. Diagnostics in UltraTax CS help test which option is better.
Deduct the foreign taxes on Schedule A
- Go to the federal1116window orB&Dwindow and enter the foreign taxes paid.
- Go to theCrwindow in theCreditsfolder and enterXin theReport all foreign tax on Schedule Afield.
UltraTax CS reports the foreign taxes and prints foreign taxes next to the
Other taxes
line on Schedule A.note
Go to the
Cr
window and view the Report all foreign tax on Schedule A
box. Then go to the B&D
window in the Income
folder and view the Elect exemption from foreign tax credit limitation
box. If both boxes are checked, the system doesn't calculate a deduction or credit.Diagnostics
You can test whether it's better for your client to report the foreign taxes as a deduction instead of a credit.
note
Refer to IRS Publication 514, Foreign Tax Credit for Individuals, for more information on who qualifies to take the Foreign Tax Credit. This publication also explains the advantages and disadvantages of claiming the Foreign Tax Credit.
- Enter all information in the return necessary to calculate the Foreign Tax Credit.
- SelectView,Diagnostics, then theWatchtab.
- Select the dropdown next toWatchand selectFreeze. If there's no dropdown next toWatch, right-click the wordWatchthen selectFreeze.
- Go to theCrwindow in theCreditsfolder.
- Mark theReport all foreign tax on Schedule Acheckbox.
- Go back to theWatchtab in theDiagnosticswindow.
- Information in theNowcolumn shows claiming the foreign taxes as a deduction on Schedule A.
- Information in theWascolumn shows taking the Foreign Tax Credit.
- If it's better to take the Foreign Tax Credit, go to theCrwindow in theCreditsfolder. Clear theReport all foreign taxes on Schedule Acheckbox.
