Foreign tax credit carryover question

bizkit · Post by **bizkit** » Sun Mar 05, 2006 1:55 pm

I am in US on an H1 visa and my wife is on H4.
My wife had some income from Canada in 2003 and 2004, and we have about $600 in foreign tax credit that we were not able to use in 2004.
Now I know that I can carry this over for next 5 years, but do I have to file something to keep track of this $600?
Or if we have Cnd income in 2008, we just file form 1116 and say we had $600 carryover from 2004?
Thanks!

nelsona · Post by **nelsona** » Mon Mar 06, 2006 7:54 am

The carry-over does not have to be mentionned every year, unless you use 1116 every year.

If you are using software (you should for 1116), the n the carry over should be tracked every year.

You will probbaly find that unless you end up getting Cdn income for which you pay no Cdn tax, you will never use this left over credit. one way to generate this low tax Cdn income would be to take a 217 withdrawal from HER RRSP, at little or no Cdn tax, and use the credit carry over to cover the little US tax that might arise from the withdrawl (line 16b on 1040).

By the way, remeber that the carry-forward is category-specific, so gen limit credit can't be used for interst credit, etc.

Alos, rules are changing to make the time period 10 years instead of 5