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Publication 514

Foreign Tax 
Credit for 


What's New(p1)


Income re-sourced by treaty.(p1)

For tax years beginning after August 10, 2010, you must compute a separate foreign tax limitation for any item of U.S. source income that is re-sourced as foreign income under an income tax treaty of which you claim benefits. See Certain Income Re-Sourced By Treaty. If your tax year is the calendar year, this change applies to your returns for 2011 and later years.

Suspension of taxes and credits until related income taken into account.(p1)

Beginning in 2011, new rules prevent splitting foreign tax credits from the income to which they relate. The credit will be not be allowed until the tax year in which the related foreign income is taken into account for tax purposes. For more information, see Internal Revenue Code section 909 and Notice 2010-92 in 2010-52 I.R.B. 916 available at

Denial of credit for covered asset acquisitions.(p1)

A foreign tax credit is not allowed on foreign income not subject to U.S. taxation due to a covered asset acquisition after December 31, 2010. A covered asset acquisition is defined as an acquisition that results in a stepped-up basis for U.S. tax purposes but not for foreign tax purposes. For more information, see Internal Revenue Code section 901(m). The IRS intends to issue guidance that will explain this provision in greater detail.



Alternative minimum tax.(p2)

In addition to your regular income tax, you may be liable for the alternative minimum tax. A foreign tax credit may be allowed in figuring this tax. See the instructions for Form 6251, Alternative Minimum Tax—Individuals, for a discussion of the alternative minimum tax foreign tax credit.

Change of address.(p2)

If your address changes from the address shown on your last return, use Form 8822, Change of Address, to notify the Internal Revenue Service.

Photographs of missing children.(p2)

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.


If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability.
In most cases, it is to your advantage to take foreign income taxes as a tax credit. The major scope of this publication is the foreign tax credit.
The publication discusses:
Unless you choose not to be subject to the foreign tax credit limit, you claim the credit by filing Form 1116 with your U.S. income tax return. Two examples with filled-in Forms 1116 are provided at the end of this publication.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

Internal Revenue Service 
Individual Forms and Publications Branch 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at * (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. You can also send us comments from, select "Comment on Tax Forms and Publications" under "Information about."
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p2)
Visit to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service 
1201 N. Mitsubishi Motorway 
Bloomington, IL 61705-6613

Tax questions.(p2)
If you have a tax question, check the information available on or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.


Useful items

You may want to see:

 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad
 519 U.S. Tax Guide for Aliens
 570 Tax Guide for Individuals With Income From U.S. Possessions
Form (and Instructions)
 1116: Foreign Tax Credit
See How To Get Tax Help near the end of this publication for information about getting these publications and this form.

Choosing To Take 
Credit or Deduction(p2)

You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. You can change your choice for each year's taxes.
To choose the foreign tax credit, you generally must complete Form 1116 and attach it to your U.S. tax return. However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. See How To Figure the Credit, later. To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions.
Figure your tax both ways—claiming the credit and claiming the deduction. Then fill out your return the way that benefits you more. See Why Choose the Credit, later.

Choice Applies to All 
Qualified Foreign Taxes(p2)

As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes.
If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. You cannot deduct any of them. Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. You cannot take a credit for any of them.
See What Foreign Taxes Qualify for the Credit later, for the meaning of qualified foreign taxes.
There are exceptions to this general rule, which are described next.

Exceptions for foreign taxes not allowed as a credit.(p2)

Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if:
For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction later, under Foreign Taxes for Which You Cannot Take a Credit.

Foreign taxes that are not income taxes.(p2)

Generally, only foreign income taxes qualify for the foreign tax credit. Other taxes, such as foreign real and personal property taxes, do not qualify. But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes.
You generally can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040).

Carrybacks and carryovers.(p2)

There is a limit on the credit you can claim in a tax year. If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year.
For more information on the limit, see How To Figure the Credit later. For more information on carrybacks and carryovers, see Carryback and Carryover later.

Making or 
Changing Your Choice(p3)

You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return for the tax year in which the taxes were actually paid or accrued. You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective.


You paid foreign taxes for the last 13 years and chose to deduct them on your U.S. income tax returns. You were timely in both filing your returns and paying your U.S. tax liability. In February 2010, you file an amended return for tax year 1999 choosing to take a credit for your 1999 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. Because the regular due date of your 1999 return was April 15, 2000, this choice is timely (within 10 years).
Because there is a limit on the credit for your 1999 foreign tax, you have unused 1999 foreign taxes. Ordinarily, you first carry back unused foreign taxes arising in 1999 to, and claim them as a credit in, the 2 preceding tax years. If you are unable to claim all of them in those 2 years, you carry them forward to the 5 years following the year in which they arose.
Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 1997 and 1998 has passed, you cannot change your choice and carry the unused 1999 foreign taxes back to tax years 1997 and 1998.
Because the 10-year periods for changing the choice have not passed for your 2000 through 2004 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 1999 foreign taxes. However, you must reduce the unused 1999 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 1997 and 1998.
You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later.