Exemption From Foreign Tax Credit Limit
Your foreign tax credit is subject to a limit based on your taxable
income from foreign sources. You figure the limit and the credit on Form
1116, Foreign Tax Credit (Individual, Estate, Trust, or Nonresident
Alien Individual). Beginning in 1998, you will not be subject to
this limit and will be able to claim the credit without using Form 1116
if the following requirements are met.
- You are an individual.
- Your only foreign source income for the tax year is passive income
(dividends, interest, royalties, etc.) reported to you on a payee statement
(such as a Form 1099-DIV
or Form 1099-INT).
- Your qualified foreign taxes for the tax year are not more than
$300 ($600 if filing a joint return) and they are reported on a payee statement.
- You elect this procedure for the tax year.
If
you make this election, you cannot carry back or carry over any unused
foreign tax to or from this tax year.
For more information on the foreign tax credit, see Publication
514, Foreign Tax Credit for Individuals.
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