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Old 12.03.2016, 20:16
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US TAX, Foreign Tax Credit, IRS Form 1116

I have wondered why the f1116 reduced my foreign tax credit when it was designed to avoid double taxation. Then I read, this time in PUB 54, "the foreign tax credit can only reduce your US taxes on foreign source income;it cannot reduce US taxes on US source income." This explains why the mismatch exists but doesn't justify why.

Another EF member, The village idiot, linked a guide (FAQ:Expats Guide to US Tax, FAQ: Expat's Guide to US Tax) that answers part of my question, there's actually another form that you can use to address this problem, called "Additional Foreign Tax Credit on US Income".

Has anyone actually used this form to actually minimize the double taxation?

Last edited by 3Wishes; 12.03.2016 at 21:14. Reason: removed extra spaces
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Old 13.03.2016, 14:44
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Re: US TAX, Foreign Tax Credit, IRS Form 1116

Hey, Its4Me.

I cannot help with your question other than to ask if you have checked to see if TurboTax has your fact-pattern built-in to its program?

I believe they cover different foreign tax credits, exclusions, etc., so maybe they've written the rules surrounding your fact-pattern into their software as well.

Good luck!
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Old 16.03.2016, 10:52
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Re: US TAX, Foreign Tax Credit, IRS Form 1116

Quote:
Since you are living in Switzerland, you should be claiming the Foreign Earned Income Exclusion (FEIE) on Form 2555. For 2015, you can exclude up to $100,800 of Foreign Earned income.
Plus the housing exclusion, which is $30k+ (higher in some places).

Tom

Last edited by 3Wishes; 16.03.2016 at 22:14. Reason: removed name from quote
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Old 16.03.2016, 11:56
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Re: US TAX, Foreign Tax Credit, IRS Form 1116

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Plus the housing exclusion, which is $30k+ (higher in some places).
Tom
2015 IRS Housing Allowances for Switzerland are:
Geneva: $95,200
Bern: $66,200
Zurich: $39,219
All other CH cities: $32,900

https://www.irs.gov/instructions/i2555/ch02.html#d0e761

The question then arises where do US diplomats and functionaries live in Switzerland (2014):
Geneva: 1,512
Lausanne/Vaud: 432
Bern: 109
Basel: 73
Zurich: -0-

https://www.pxweb.bfs.admin.ch/Selec....px&px_type=PX

So where do Americans, excluding US diplomats and functionaries, live in Switzerland:
Zurich: 4,366
Vaud: 3,172
Geneva: 2,771
Basel-Stadt: 1,348
Ticino: 859
Basel-Land: 829
Bern: 829

Zug: 678
Aargau: 527
Lucerne: 422
Other CH cantons: 2,497

It's probably just me but I'm seeing a positive correlation between where US diplomats and functionaries live and the amount of the IRS Housing Allowance. Also, if I were a US diplomat/ functionary living in Lausanne, I'd be feeling a little left out of the housing allowance giveaway!
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