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Posted by Jessica on April 27, 2008, 12:15 pm
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I am using TaxCut.
Two years ago I had a big income, but last year not very much.
When I add the state taxes I paid last year (for the year before) AMT goes
up so my taxes are exactly the same as before I add the deduction, EXCEPT
TaxCut drops a foreign tax credit, so I actually end up owing more tax after
adding the big deduction than I did before.
1) Could this be correct?!
2) Can I choose not to take the deduction?
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Posted by removeps-groups@yahoo.com on April 27, 2008, 8:37 pm
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> I am using TaxCut.
> Two years ago I had a big income, but last year not very much.
> When I add the state taxes I paid last year (for the year before) AMT goes
> up so my taxes are exactly the same as before I add the deduction, EXCEPT
> TaxCut drops a foreign tax credit, so I actually end up owing more tax after
> adding the big deduction than I did before.
>
> 1) Could this be correct?!
> 2) Can I choose not to take the deduction?
Is form 6251, line 32 ("Alternative minimum tax foreign tax credit"),
less than the amount on form 1040, line 51 ("Foreign tax credit.
Attach Form 1116 if required")? I'm still trying to understand how
form 1116 works, so cannot answer your question fully.
I think you can elect to not claim the state tax deduction. Every
year people forget to do it, and no harm in that. But let's see what
others say.
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
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Posted by removeps-groups@yahoo.com on April 30, 2008, 10:08 pm
Please log in for more thread options On Apr 27, 5:37 pm, "removeps-gro...@yahoo.com" <removeps-
gro...@yahoo.com> wrote:
> Is form 6251, line 32 ("Alternative minimumtaxforeigntaxcredit"),
> less than the amount on form 1040, line 51 ("Foreigntaxcredit.
> Attach Form 1116 if required")? I'm still trying to understand how
> form 1116 works, so cannot answer your question fully.
Does anyone know how form 6251, line 32 ("Alternative minimum foreign
tax credit") works? Suppose you had $2000 in foreign tax through 1099-
DIV only (and $20,000 in foreign dividends), would your AMT foreign
tax credit be just $2000?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Arthur Kamlet on April 30, 2008, 11:33 pm
Please log in for more thread options >On Apr 27, 5:37 pm, "removeps-gro...@yahoo.com" <removeps-
>gro...@yahoo.com> wrote:
>
>> Is form 6251, line 32 ("Alternative minimumtaxforeigntaxcredit"),
>> less than the amount on form 1040, line 51 ("Foreigntaxcredit.
>> Attach Form 1116 if required")? I'm still trying to understand how
>> form 1116 works, so cannot answer your question fully.
>
>Does anyone know how form 6251, line 32 ("Alternative minimum foreign
>tax credit") works? Suppose you had $2000 in foreign tax through 1099-
>DIV only (and $20,000 in foreign dividends), would your AMT foreign
>tax credit be just $2000?
The 1116 is trying to limit your foreign tax credit rate to be
no more than your federal US income tax rate; for AMT, no more
than your AMT rate.
So in your example of a foreign effective rate of 10%, that will
be allowed for both ordinary tax and for AMT. But had your foreign
tax rate been 40%, your regular and also your AMT rate would have been
lower, and so foreign tax credit would have been lower than what you
paid in foreign tax.
Now then, if the 2000 of foreign tax had been 4000 on foreign dividends of
20,000, that is a 20% rate, which might be more than your qualified
dividends rate, if applicable, so you might be limited to only 15% of
20,000 or 3000 of foreign tax credit based on the 1116.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by removeps-groups@yahoo.com on May 2, 2008, 1:37 pm
Please log in for more thread options On Apr 30, 8:33 pm, kam...@panix.com (Arthur Kamlet) wrote:
Thanks for the explanation. I was struggling with these forms for
some days.
> Now then, if the 2000 of foreigntaxhad been 4000 on foreign dividends of
> 20,000, that is a 20% rate, which might be more than your qualified
> dividends rate, if applicable, so you might be limited to only 15% of
> 20,000 or 3000 of foreigntaxcredit based on the 1116.
The above paragraph is only true if these were foreign qualified
dividends, right? If they were regular dividends, your regular US tax
on them might have been more than 25%, in which case the AMT foreign
tax credit and regular foreign tax credit would be the same.
Also, why is that that if your foreign tax is less than or equal to
$300 (or $600 if married filing jointly), you don't have to file form
1116. Say you're in the 15% bracket and own foreign stocks that pay
dividends and foreign taxes, and the foreign taxes are 20% of the
dividends, and the foreign tax is around $50. Your foreign tax credit
should be limited to some value under 15% (or as your total tax rate
will be less than 15% after deduction, exemption, and amount in 10%
tax bracket). Yet you get the full tax credit.
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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