This year, I am taking the foreign tax credit rather than excluding the income so that I may have enough earned income to contribute to my IRA.
I first went to “Wages & Income” Tab and entered the money I made from job in Japan. Then, I went to the “Deductions & Credits” Tab and went to the “Foreign Taxes” Section. I took a credit rather than an itemized deduction.
I chose the “general category income” as my income type, then I added Japan as a country in which I wish to take a foreign tax credit. There is a section that says, “Other Gross Income – Japan”, “Enter descriptions and amounts for any **other** gross income you received from sources in Japan. Do **not** enter any income already reported on Form 1099-INT, Form 1099-DIV, Form 2555, or Schedules K-1.”
From here, I entered my income from my job in Japan, which I had reported before under the “Wages & Income” Tab. Later, it asked about “Foreign Taxes on Other Income”. I typed in my income tax from my job in Japan (about $500 USD). This reduced the money I owed to the US government from about $800 to $300.
Did I do this correctly?
3 comments
Unless you’re one of the few who make over the ~$110k that can be excluded by using the FEIE (foreign earned income exclusion), you cannot also claim the FTC (foreign tax credit). It’s an either/or choice.
Given that you’re under $110k, you have to choose one or the other–and not only that, you cannot bounce back and forth year to year. If you’ve been using the FEIE, you need to declare that you’re changing to the FTC, and then stick with that for five years (or petition the IRS earlier than that, and given the way things are going, you may not get an answer). And vice versa, if you’ve been using the FTC, you have to declare that you’re switching to the FEIE, and then stick with that.
Only if you make over the $110k FEIE level can you use both–then you use the FEIE first, and for anything over and above that, you can then apply the FTC.
There may be a turbotax sub, also ask at r/USExpatTaxes
Your question is specific to TurboTax, so it seems like the kind of thing you might want to ask to the TurboTax people or on a TurboTax forum somewhere.
Make sure you double check the tax return TurboTax prepares for you. It should include a Form 1116 for the FTC. There shouldn’t be a Form 2555, that’s for the FEIE.