Does the principle of not double-taxing foreign income apply to capital gains? Specifically, if I sell a house in a foreign country and pay capital-gain tax there, does that reduce the capital gains on my US taxes?
bh1 wrote: ↑Fri Jun 02, 2023 10:22 am
Does the principle of not double-taxing foreign income apply to capital gains? Specifically, if I sell a house in a foreign country and pay capital-gain tax there, does that reduce the capital gains on my US taxes?
I believe you will have to claim a tax credit against your US taxes in this scenario.
bh1 wrote: ↑Fri Jun 02, 2023 10:22 am
Does the principle of not double-taxing foreign income apply to capital gains? Specifically, if I sell a house in a foreign country and pay capital-gain tax there, does that reduce the capital gains on my US taxes?
I believe you will have to claim a tax credit against your US taxes in this scenario.
Yes, I think that is the case. And like many credits, you may or may not be kept whole.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
bh1 wrote: ↑Fri Jun 02, 2023 10:33 amThank you, both. I get the feeling that this will break TurboTax.
I wouldn't be so pessimistic. Turbotax has handled my cash out of a Canadian RRSP and Canadian dividends pretty easily for over a decade. Out of curiosity, what is the country involved and is there a tax treaty?
bh1 wrote: ↑Fri Jun 02, 2023 10:33 amThank you, both. I get the feeling that this will break TurboTax.
I wouldn't be so pessimistic. Turbotax has handled my cash out of a Canadian RRSP and Canadian dividends pretty easily for over a decade. Out of curiosity, what is the country involved and is there a tax treaty?
If you use the download version of TurboTax, you can (and should) check the forms yourself before filing. This applies not just to Form 1116; checking the forms allows you to identify data-entry errors, and bugs in the software.