FTC T2209 with US income/tax taking into account standard deduction?

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rne
Posts: 6
Joined: Thu Oct 07, 2021 8:00 am

FTC T2209 with US income/tax taking into account standard deduction?

Post by rne »

hello,

if I am a US citizen that has to file a 1040 each year and want to take advantage of the T1's foreign tax credit do I have to reduce my income by the 1040 standard deduction, or do I just apportion the tax based on the percentage of gross income?

As a simplified example:

US-IRA income of USD20k
US-Dividend income of USD10k
CDN-interest income USD1k
total income USD31k

IRS tax owing USD1k

I know the CDN interest will not be able to be claimed for the foreign tax credit, but for the dividend and IRA income do I just allocate tax paid by dividing each type of income by the total income and multiply that by the tax owing to claim the FTC? So:

US-IRA income: 20k/31k * 1k = 645.16
dividend income: 10k/31k * 1k = 322.58
total FTC: 967.74

Or will I have to take into account and allocate the IRS non-itemized standard deduction and any other deductions for the tax year and apportion this deduction to my income before multiplying by the total taxes paid?

thank you in advance
nelsona
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Location: Nowhere, man

Re: FTC T2209 with US income/tax taking into account standard deduction?

Post by nelsona »

Whether of not you use the standard deduction in making your calculation shouldn't make a difference, since you would apportion the standard deduction among the various incomes as well.

so just take the final tax and apportion it over the various incomes. 20/31 of the US tax for IRA, etc.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
rne
Posts: 6
Joined: Thu Oct 07, 2021 8:00 am

Re: FTC T2209 with US income/tax taking into account standard deduction?

Post by rne »

thanks, nelsona, that makes sense and I think I was over-complicating things. i had been going through pub 514 and the section on "Allocation of Foreign Taxes (https://www.irs.gov/publications/p514#e ... 1000224501) for the f1116 got me wondering whether there was something more complex for the T2209. It's funny though in the example they cite in that section they do the same over-complication allocating the deductions to each type of income when actually type of income divided by total income multiplied by total tax would yield the same result. i see that now running the calculations on their example.
Galammys
Posts: 2
Joined: Thu Sep 22, 2022 1:42 pm

Re: FTC T2209 with US income/tax taking into account standard deduction?

Post by Galammys »

The taxation system in the US has always been too complicated for me. I moved here more than 7 years ago, but I still cannot get used to it. In the country where I lived, it was done by the government, and they just deducted the necessary sum from your salary every month. There also is the property tax, but it’s also calculated, and we just have to pay it once a year. It is much easier than here, and I always have issues making my tax statement
Galammys
Posts: 2
Joined: Thu Sep 22, 2022 1:42 pm

Re: FTC T2209 with US income/tax taking into account standard deduction?

Post by Galammys »

The taxation system in the US has always been too complicated for me. I moved here more than 7 years ago, but I still cannot get used to it. In the country where I lived, it was done by the government, and they just deducted the necessary sum from your salary every month. There also is the property tax, but it’s also calculated, and we just have to pay it once a year. It is much easier than here, and I always have issues making my tax statement
I only have to imagine what the paperwork of people like Rick Ross https://wealthyliving.com/money/rick-ross-net-worth/ looks like.
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