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SCHY
Jul 16, 2023 4:26:15 GMT
Post by anitya on Jul 16, 2023 4:26:15 GMT
liftlock , May be my question was too cryptic. What I wanted to know was whether "foreign tax credit is available for foreign taxes paid if an itemized deduction is claimed for other taxes?" BARD says, "Yes, you can claim the foreign tax credit even if you itemize your deductions for other taxes. You do not have to choose between claiming the foreign tax credit and itemizing your deductions for other taxes. You can do both." But then I asked it to give me a citation for its answer and received a wrong citation. So, no answer yet, though I can imagine that being the correct answer. (BTW, I am not making choices of foreign investment based on credit vs deduction, the choice I am trying to make is taxable account or IRA for the year when I might take an itemized deduction for other expenses, including property taxes.) Edit: I entered additional charitable deductions into 2022 TT and TT switched me automatically from standard deduction to itemized deduction but kept my foreign tax credit intact. So, it seems foreign tax credit is available for foreign taxes paid even if an itemized deduction is claimed for other taxes.
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SCHY
Jul 16, 2023 9:11:47 GMT
Post by chang on Jul 16, 2023 9:11:47 GMT
Don't focus too much on tax implications of foreign dividends. Do think about king dollar depreciating against foreign currencies which gives an oomph to the overall returns from foreign investments. In the end, this issue might prove to be a rounding error. I don't think about F/X movements, because I believe they are unpredictable and unforecastable (at least by me). My foreign equity exposure is all unhedged, and I just let currencies do whatever they're going to do. On the other hand, I think it does make sense to recognize that you cannot take a credit for foreign taxes paid if they assets are in your IRAs. So, for example, it would be a bit crazy to own VYMI, with a portfolio yield of 6.29%, in an IRA instead of taxable, if given the choice.
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SCHY
Jul 16, 2023 11:56:47 GMT
chang likes this
Post by steadyeddy on Jul 16, 2023 11:56:47 GMT
Don't focus too much on tax implications of foreign dividends. Do think about king dollar depreciating against foreign currencies which gives an oomph to the overall returns from foreign investments. In the end, this issue might prove to be a rounding error. I don't think about F/X movements, because I believe they are unpredictable and unforecastable (at least by me). My foreign equity exposure is all unhedged, and I just let currencies do whatever they're going to do. On the other hand, I think it does make sense to recognize that you cannot take a credit for foreign taxes paid if they assets are in your IRAs. So, for example, it would be a bit crazy to own VYMI, with a portfolio yield of 6.29%, in an IRA instead of taxable, if given the choice. Fair enough. That is why I said "Don't focus too much on tax implications."
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SCHY
Jul 16, 2023 17:13:47 GMT
Post by liftlock on Jul 16, 2023 17:13:47 GMT
liftlock , May be my question was too cryptic. What I wanted to know was whether "foreign tax credit is available for foreign taxes paid if an itemized deduction is claimed for other taxes?" BARD says, "Yes, you can claim the foreign tax credit even if you itemize your deductions for other taxes. You do not have to choose between claiming the foreign tax credit and itemizing your deductions for other taxes. You can do both." But then I asked it to give me a citation for its answer and received a wrong citation. So, no answer yet, though I can imagine that being the correct answer. (BTW, I am not making choices of foreign investment based on credit vs deduction, the choice I am trying to make is taxable account or IRA for the year when I might take an itemized deduction for other expenses, including property taxes.) Edit: I entered additional charitable deductions into 2022 TT and TT switched me automatically from standard deduction to itemized deduction but kept my foreign tax credit intact. So, it seems foreign tax credit is available for foreign taxes paid even if an itemized deduction is claimed for other taxes. Anitya, I am not a CPA, but I believe the short answer is yes. Here is my reasoning: The instructions for IRS Form 1040 Schedule A Line 6 - Other Taxes" indicate that itemized deductions can be taken for income taxes paid to a foreign country and generation skipping taxes (GST) imposed on certain income distributions. Deductions for foreign taxes paid can be taken either as an itemized deduction or as a tax credit. Claiming both an itemized deduction and a tax credit for foreign taxes paid would be double dipping and is not allowed. Only one or the other is allowed. Claiming a tax credit for foreign taxes paid does not prevent one from itemizing their deductions or from claiming an itemized deduction for generation skipping taxes (GST) imposed on certain income distributions on Line 6 - Other Taxes. Finally, it's worth remembering that itemized deductions only reduce taxable income by the amount they exceed a taxpayers standard deduction. www.irs.gov/pub/irs-pdf/i1040sca.pdf
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