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Publication 514

Foreign Tax 
Credit for 



Future developments.(p1)
For the latest information about developments related to Pub. 514, such as legislation enacted after it was published, go to
Alternative minimum tax.(p1)
In addition to your regular income tax, you may be liable for the alternative minimum tax. A foreign tax credit may be allowed in figuring this tax. See the Instructions for Form 6251 for a discussion of the alternative minimum tax foreign tax credit.
Change of address.(p1)
If your address changes from the address shown on your last return, use Form 8822 to notify the IRS.
Photographs of missing children.(p1)
The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.


If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability.
In most cases, it is to your advantage to take foreign income taxes as a tax credit. The major scope of this publication is the foreign tax credit.
The publication discusses:
Unless you qualify for exemption from the foreign tax credit limit, you claim the credit by filing Form 1116 with your U.S. income tax return.

Comments and suggestions.(p2)

We welcome your comments about this publication and your suggestions for future editions.
You can send us comments through
Or you can write to:

Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p2)
Visit to download forms and publications. Otherwise, you can go to to order current and prior-year forms and instructions. Your order should arrive within 10 business days.
Tax questions.(p2)
If you have a tax question not answered by this publication, check and How To Get Tax Help at the end of this publication.


Useful items

You may want to see:

 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad
 519 U.S. Tax Guide for Aliens
 570 Tax Guide for Individuals With Income From U.S. Possessions
Form (and Instructions)
 1116: Foreign Tax Credit
See How To Get Tax Help near the end of this publication for information about getting these publications and this form.

Choosing To Take Credit or Deduction(p2)

You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. You can change your choice for each year's taxes.
To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U.S. tax return. However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. See How To Figure the Credit, later. To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040).
Figure your tax both ways—claiming the credit and claiming the deduction. Then fill out your return the way that benefits you more. See Why Choose the Credit, later.

Choice Applies to All Qualified Foreign Taxes(p2)

As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes.
If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. You cannot deduct any of them. Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. You cannot take a credit for any of them.
See What Foreign Taxes Qualify for the Credit, later, for the meaning of qualified foreign taxes.
There are exceptions to this general rule, which are described next.

Exceptions for foreign taxes not allowed as a credit.(p2)

Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if you did any of the following.
For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction, later, under Foreign Taxes for Which You Cannot Take a Credit.

Foreign taxes that are not income taxes.(p2)

In most cases, only foreign income taxes qualify for the foreign tax credit. Other taxes, such as foreign real and personal property taxes, do not qualify. But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes.
In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040).

Carrybacks and carryovers.(p2)

There is a limit on the credit you can claim in a tax year. If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year.
For more information on the limit, see How To Figure the Credit, later. For more information on carrybacks and carryovers, see Carryback and Carryover, later.

Making or Changing Your Choice(p2)

You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective.
Note that while the limitations period for refund claims relating to a foreign tax credit generally runs parallel with the election period, the limitations period for refund claims relating to a deduction of foreign tax does not, and may expire before the end of the election period.


You paid foreign taxes for the last 13 years and chose to deduct them on your U.S. income tax returns. You always filed your returns and paid your taxes by April 15. In February 2017, you file an amended return for tax year 2006 choosing to take a credit for your 2006 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. Because your 2006 return is treated as though filed on April 15, 2007, this choice is timely (within 10 years).
Because there is a limit on the credit for your 2006 foreign tax, you have unused 2006 foreign taxes. Ordinarily, you first carry back unused foreign taxes arising in 2006 to, and claim them as a credit in, the preceding tax year. If you are unable to claim all of them in that year, you carry them forward to the 10 years following the year in which they arose.
Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2005 has passed, you cannot change your choice and carry the unused 2006 foreign taxes back to tax year 2005.
Because the 10-year periods for changing the choice have not passed for your 2007 through 2016 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2006 foreign taxes. However, you must reduce the unused 2006 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax year 2005.
You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later.