[jdiiorio]

Hi All my exam is today later in the day and I was checking to make sure I knew everything on my list to “confirm” this last week. I just realized that I never figured out for foreign taxes paid do you take a credit, and itemized deduction or is it up to the taxpayer to choose? I believe becker shows it under both a credit and an itemized deduction so this confused me.

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[jdiiorio]

Found the answer in case anyone is wondering.

An individual can either itemize or take a credit. It might be more beneficial to itemize since it is NOT limited to the 2% AGI limit or anything else. A tax credit is limited to the lesser of:

a) Foreign Taxes Paid

or

b)[Taxable income from all foreign operations / ( Taxable income +exemptions) ] * US Tax

Any amount not used as a credit can be carried forward 10 years and back 1 year.

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[Anonymous]

Yes, you can only use one. Never use both!!! That's a no-no!!

[jeff]

REG NINJA:

FOREIGN TAXES PAID – SCHEDULE A

– Foreign income tax and real estate taxes are deductible

– Foreign personal property taxes are not deductible

– Foreign tax assessments are not deductible – they are added to basis

[jdiiorio]

haha yea I just realized the title of this thread was misleading as I should of said Credit, Deduction or either? haha

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[jdiiorio]

Thanks Jeff and CPAMan! – I hope this is in my exam now that I have it cleared out =) heading there in 2 hours!

ILLINOIS CANDIDATE
FAR - Passed
BEC - Passed
AUD - Passed

[Author]

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