1040-US: Exemption from foreign tax credit limitation (suppress Form 1116) (2024)

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Question

Who qualifies for the exemption from the foreign tax credit limitation and how can I make that election?

Answer

A taxpayer may be able to claim the foreign tax credit without filing Form 1116 if all of the following apply.

• All foreign gross income is passive.
• The income and foreign taxes are reported on a qualified payee statement.
• The total creditable foreign taxes are not more than $300 ($600 for married filing jointly).

If the taxpayer qualifies for this exemption, enterXin theElect Exemption from Foreign Tax Credit Limitationfield in the B&D screen in the Income folder. When you make this election and the 1116 screen contains only qualified passive income with creditable foreign taxes of no more than $300 ($600 if married filing jointly), Form 1116 will not calculate including carryovers from or to the current tax year. Creditable foreign taxes will print directly on the Foreign tax credit line on Schedule 3 (Form 1040).

The application ignores this election and prints Form 1116 if more than one category of income is present or if the total creditable foreign taxes exceed the eligibility threshold of $300 ($600 if married filing jointly).

If you force an amount in the Amount exempt from foreign tax credit limitation (Force) field on the B&D screen, it will report on Schedule 3 (Form 1040) without review of exemption requirements.

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