Publication 514: Foreign Tax Credit for Individuals; Additional Material

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Table of Contents

Worksheet. Additional Foreign Tax Credit on U.S. income*

I. U.S. tax on U.S. source income
	(U.S. source rules)
		1.	Dividends
		2.	Interest
		3.	Royalties
		4.	Capital gain
		5.	a.	Gross earned income
			b.	Allocable employee business expenses
			c.	Net compensation. Subtract line 5b from line 5a
		6.	a.	Gross rent, real property
			b.	Direct expenses
			c.	Net rent. Subtract line 6b from line 6a
		7.	Other
		8.	Add lines 1–5a, 6a and 7 in columns A and lines 1–4, 5c, 6c an 7 in column B
		9.	Enter tax from Form 1040 (see instructions)
		10.	Enter adjusted gross income (AGI) from line 36, Form 1040
		11.	Divide line 9 by line 10. Enter the result as a decimal. This is the average tax rate on your AGI.
		12.	Multiply line 11 by line 8 (column B). This is your estimated U.S. tax on your U.S. source income.
II. Tax at source allowable under treaty
	A.	Items fully taxable by U.S.
		13.	a.	Identify
			b.	Multiply line 13a by line 11
	B.	Items partly taxable by U.S.
		14.	a.	Identify
			b.	Treaty rate
			c.	Allowable tax at source (Multiply line 14a by 14b)
		15.	a.	Identify
			b.	Treaty rate
			c.	Allowable tax at source (Multiply line 15a by 15b)
		16.	Total (Add line 13b, 14c, and 15c)
	C.	Identify each item of U.S. source income from Col. A, Step I, on which the U.S. may not, under treaty, tax residents of the other country who are not U.S. citizens


III. Additional credit
		17.	Residence country tax on U.S. source income before foreign tax credit
		18.	Foreign tax credit allowed by residence country for U.S. income tax paid
		19.	Maximum credit. Subtract the greater of line 16 or line 18 from line 12.
		20.	a.	Enter the amount from line 17
			b.	Enter the greater of line 16 or line 18
			c.	Subtract line 20b from line 20a
		21.	Additional credit. Enter the smaller of line 19 or line 20c. Add this amount to line 33 of Part IV Form 1116.

* See the discussion on Tax Treaties for information on when you should use this worksheet.

Worksheet Instructions. Additional Foreign Tax Credit on U.S. Income


STEP I
Figure the estimated tax on U.S. source income using U.S. source rules.
	Lines 1–7 — Enter the gross amount for each type of income in Column A, and the net amount in column B.
	Line 9 — Enter the amount from Form 1040, line 43.

STEP II
Determine the amount of tax that the United States is allowed to collect at source under the treaty on income of residents of the other country who are not U.S. citizens.
	PART A — Income fully taxable by the United States. Identify the type and amount on line 13a.
	PART B — Income for which treaty limits U.S. tax at source.
	Lines 14–15 — Identify each type and amount of income. Use the specified treaty rate. (See Publication 901, U.S. Tax Treaties.)
	PART C — Identify the items not taxable at source by the United States under the treaty.

STEP III
Figure the amount of the additional credit for foreign taxes paid or accrued on U.S. source income. The additional credit is limited to the difference between the estimated U.S. tax (Step 1) and the greater of the allowable U.S. tax at source (Step II) or the foreign tax credit allowed by the residence country (line 18).
	Line 17 — Enter the amount of the residence country tax on your U.S. source income before reduction for foreign tax credits. If possible, use the fraction of the pre-credit residence country tax which U.S. source taxable income bears to total taxable income. Otherwise, report that fraction of the pre-credit foreign tax which gross U.S. income bears to total gross income for foreign tax purposes.
	Line 21 — This amount may be claimed as a foreign tax credit on Form 1116. Complete Form 1116 according to the instructions. Add the additional credit to line 33, Part IV, of Form 1116 and report that total on your Form 1040. File this worksheet with your Form 1040 as an attachment to Form 1116.