Form 1116

Foreign Tax Credit (Individual, Estate, or Trust)

Tax form 1116 is for taxpayers to claim the foreign tax credit for income taxes paid or accrued to a foreign country so they avoid double taxation by the U.S. and other nations. There are multiple categories on IRS form 1116, the General and Passive categories being most common. The General category is for earned income such as wages and salaries; passive is for investment income such as interest, capital gains, and dividends. General and passive tax credits are calculated separately, as are the credits from the other categories. Any unused credits first carry back to the prior year and then carry forward for ten years to offset U.S. taxes on that category of foreign sourced income.