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Old 27.04.2018, 04:22
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US Tax Question: Foreign Tax Credit on Unemployment Insurance (ALV) Deductions?

A question for the American tax filers here. Does anyone know if the Swiss mandatory unemployment insurance deductions qualify for foreign tax credits on form 1116?

I'm talking about the 2.2% ALV taxes on gross salary (becomes 1% for salary amounts above ~150k CHF) which are split 50/50 between employer and employee.

Of course the employer payments do not qualify for foreign tax credit, but my impression reading IRS Pub 514 is that employee payments seem to qualify.
https://www.irs.gov/publications/p51...link1000224427

Excerpt:
Pension, unemployment, and disability fund payments.
A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual.

No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. For more information about these agreements, see Pub. 54.


I'm curious to know whether others add these amounts to Form 1116 or leave them out. Considering the credits reduce US tax liability 1:1, it seems quite sensible to count these as credits if legal.
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Old 27.04.2018, 04:27
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Re: US Tax Question: Foreign Tax Credit on Unemployment Insurance (ALV) Deductions?

Not an american tax filer myself, but I've heard from my less fortunate friends that yes, it counts indeed.
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Old 27.04.2018, 09:28
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Re: US Tax Question: Foreign Tax Credit on Unemployment Insurance (ALV) Deductions?

ALV deductions are not taxes, they are insurance payments.

Tom
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Old 27.04.2018, 09:56
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Re: US Tax Question: Foreign Tax Credit on Unemployment Insurance (ALV) Deductions?

Can't take a credit on what is not taxed by the IRS
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