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                                                                                                             Department of the Treasury
                                                                                                             Internal Revenue Service
2023

Instructions for Form 1116

Foreign Tax Credit
(Individual, Estate, or Trust)

Section references are to the Internal Revenue Code unless                   2023-32 I.R.B. 427, available at IRS.gov/irb/
otherwise noted.                                                             2023-32_IRB#NOT-2023-55; and Notice 2023-80, 2023-52 
                                                                             I.R.B. 1583, available at IRS.gov/irb/
Contents                                                               Page
                                                                             2023-52_IRB#NOT-2023-80.
General Instructions    . . . . . . . . . . . . . . . . . . . . . . . . . 1
Election To Claim the Foreign Tax Credit 
Without Filing Form 1116               . . . . . . . . . . . . . . . . .  1  Reminders
Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . .         2  Alternative minimum tax. In addition to your regular income 
Credit or Deduction . . . . . . . . . . . . . . . . . . . . . . .         2  tax, you may be liable for the alternative minimum tax. A 
                                                                             foreign tax credit may be allowed in figuring this tax. See the 
Foreign Taxes Eligible for a Credit              . . . . . . . . . . . .  2
                                                                             Instructions for Form 6251, Alternative Minimum 
Foreign Taxes Not Eligible for a Credit                . . . . . . . . .  3  Tax—Individuals, or the Instructions for Schedule I (Form 
Foreign Currency Conversion                . . . . . . . . . . . . . . .  3  1041), Alternative Minimum Tax—Estates and Trusts, for a 
Foreign Tax Redeterminations . . . . . . . . . . . . . . .                4  discussion of the alternative minimum tax foreign tax credit.
Income From Sources Outside the United 
States       . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5  More Information
Categories of Income           . . . . . . . . . . . . . . . . . . . . .  5  For more information about, or assistance with, figuring the 
Special Rules . . . . . . . . . . . . . . . . . . . . . . . . . . .       7  foreign tax credit, the following IRS resources are available.
Foreign Qualified Dividends and Capital                                      Publications. See Pub. 514, Foreign Tax Credit for 
Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . .            9  Individuals. The following publications may also be helpful.
Specific Instructions   . . . . . . . . . . . . . . . . . . . . . . . .   11 • Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens 
Part I—Taxable Income or Loss From Sources                                   Abroad.
Outside the United States                . . . . . . . . . . . . . . .    11 • Pub. 519, U.S. Tax Guide for Aliens.
Part II—Foreign Taxes Paid or Accrued . . . . . . . .                     18 • Pub. 570, Tax Guide for Individuals With Income From U.S. 
                                                                             Territories.
Part III—Figuring the Credit . . . . . . . . . . . . . . . .              19
Part IV—Summary of Credits From Separate                                              If you are overseas, call 267-941-1000 (not toll free).
Parts III        . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25

Future Developments                                                                   Write to: Internal Revenue Service, International 
                                                                                      Accounts, Philadelphia, PA 19255-0725
For the latest information about developments related to 
Form 1116 and its instructions, such as legislation enacted 
after they were published, go to IRS.gov/Form1116.
                                                                             General Instructions
What’s New
                                                                             Election To Claim the Foreign Tax 
New checkbox on line 10.         If you enter an amount on 
line 10, there is a new checkbox for you to indicate that you                Credit Without Filing Form 1116
don't need to attach Schedule B (Form 1116). See the                         You may be able to claim the foreign tax credit without filing 
instructions for line 10, later.                                             Form 1116. By making this election, the foreign tax credit 
Final foreign tax credit regulations.          Final foreign tax             limitation (lines 15 through 23 of the form) won't apply to you. 
credit regulations were published January 4, 2022. The new                   This election is available only if you meet all of the following 
regulations made changes to the rules relating to the                        conditions.
creditability of foreign taxes under sections 901 and 903, the               • All of your foreign source gross income was “passive 
applicable period for claiming a credit or deduction for foreign             category income” (which includes most interest and 
taxes, and the new election to claim a provisional credit for                dividends). See c. Passive Category Income, later. However, 
contested foreign taxes. A Notice was subsequently released                  for this purpose, passive income also includes (a) income 
on July 21, 2023, allowing taxpayers to apply prior rules in                 subject to the special rule for high-taxed income, described 
place of certain rules provided in the new regulations. The                  later; and (b) certain export financing interest.
rules described in this Notice were modified in part by a                    • All the income and any foreign taxes paid on it were 
Notice released on December 11, 2023, to address their                       reported to you on a qualified payee statement. Qualified 
application to partnerships and their partners and to extend                 payee statements include Form 1099-DIV, Form 1099-INT, 
the relief period until further notice. For more information, see            Schedule K-1 (Form 1041), Schedule K-3 (Form 1065), 
Treasury Decision 9959, 2022-03 I.R.B. 328, available at                     Schedule K-3 (Form 1120-S), or similar substitute 
IRS.gov/irb/2022-03_IRB#TD-9959; Notice 2023-55,                             statements.

Dec 28, 2023                                                           Cat. No. 11441F

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• Your total creditable foreign taxes aren't more than $300
Credit or Deduction
($600 if married filing a joint return).
Instead of claiming a credit for eligible foreign taxes, you can
This election isn't available to estates or trusts. choose to deduct foreign income taxes. Form 1040 or
If you make this election, the following rules apply. 1040-SR filers choosing to do so would deduct foreign
• You can't carry over to or from any other year any foreign income taxes on Schedule A (Form 1040), Itemized
taxes paid or accrued in a tax year to which the election Deductions. Generally, if you take the credit for any eligible
applies (but carryovers to and from other years are foreign taxes, you can't take any part of that year's foreign
unaffected). See the instructions for line 10, later. taxes as a deduction. However, even if you take the credit for
• You are still required to take into account the general rules eligible foreign taxes for the year, you can take a deduction
for determining whether a tax is creditable. See Foreign for the following.
Taxes Eligible for a Credit and Foreign Taxes Not Eligible for a • Foreign taxes not allowed as a credit because of boycott
Credit, later. provisions.
• You are still required to reduce the taxes available for credit • Taxes paid to certain foreign countries for which a credit
by any amount you would have entered on line 12 of Form has been denied, as described in item 4 under Foreign Taxes
1116. See the instructions for line 12, later. Not Eligible for a Credit, later.
• Taxes on income or gain that aren't creditable because you
To make the election, just enter on the foreign tax credit don't meet the holding period requirement, as described in
line of your tax return (for example, Schedule 3 (Form 1040), item 5 or 7 under Foreign Taxes Not Eligible for a Credit, later.
Part I, line 1) the smaller of (a) your total foreign tax, or (b) • Taxes on income or gain that aren't creditable because you
your regular tax. See the instructions for line 20, later, for how have to make related payments, as described in item 6 or 8
to figure your regular tax. under Foreign Taxes Not Eligible for a Credit, later.
• Certain taxes paid or accrued to a foreign country in
Purpose of Form connection with the purchase or sale of oil or gas extracted in
Who should file. File Form 1116 to claim the foreign tax that country, as described in item 10 under Foreign Taxes Not
credit if the election, earlier, doesn't apply and: Eligible for a Credit, later.
• You are an individual, estate, or trust; and • Taxes on income or gain that aren't creditable because
• You paid or accrued certain foreign taxes to a foreign they were paid or accrued in connection with a covered asset
country or U.S. possession. acquisition, as described in item 12 under Foreign Taxes Not
Eligible for a Credit, later.
See Foreign Taxes Eligible for a Credit, later, to determine • If you are an accrual basis taxpayer or if you elected to
if the taxes you paid or accrued qualify for the credit. claim your foreign tax credit on an accrual basis, taxes paid
Don't use Form 1116 to figure a credit for taxes paid to the that relate to a prior tax year in which you elected to claim a
U.S. Virgin Islands. Instead, use Form 8689, Allocation of deduction instead of a credit in that prior year. See
Individual Income Tax to the U.S. Virgin Islands. Regulations section 1.901-1(c)(3).
Nonresident aliens. If you are a nonresident alien, you
generally can't take the credit. However, you may be able to You may make an election to claim a credit or to change
take the credit if: from claiming a deduction to claiming a credit at any time
• You were a resident of Puerto Rico during your entire tax before the end of a special 10-year limitation period
year, or described in section 6511(d)(3) (or section 6511(c) if the
• You pay or accrue tax to a foreign country or U.S. period is extended by agreement). You may make an election
possession on income from foreign sources that is effectively to claim a deduction or to change from claiming a credit to
connected with a trade or business in the United States. But claiming a deduction at any time before the end of the
if you must pay tax to a foreign country or U.S. possession on standard 3-year limitation period described in section
income from U.S. sources only because you are a citizen or a 6511(a) (or section 6511(c) if the period is extended by
resident of that country or U.S. possession, don't use that tax agreement). See Regulations section 1.901-1(d) and Pub.
in figuring the amount of your credit. 514 for more information.

See section 906 for more information on the foreign tax Foreign Taxes Eligible for a Credit
credit allowed to a nonresident alien individual. You can take a credit for income, war profits, and excess
profits taxes paid or accrued during your tax year to any
Separate Schedules and Forms
foreign country or U.S. possession, or any political
• Use Schedule B (Form 1116) to reconcile your prior year subdivision (for example, city, state, or province) of the
foreign tax carryover with your current year foreign tax country or possession. This includes taxes paid or accrued in
carryover. See Schedule B (Form 1116) and its instructions, lieu of a foreign or possession income, war profits, or excess
and the instructions for line 10, later, for more information. profits tax that is otherwise generally imposed. For purposes
• Use Schedule C (Form 1116) to report foreign tax of the credit, U.S. possessions include Puerto Rico, the U.S.
redeterminations that occurred in the current tax year and Virgin Islands, Guam, the Northern Mariana Islands, and
that relate to prior tax years. See Schedule C (Form 1116) American Samoa. See Pub. 514 for more information on what
and its instructions, and Foreign Tax Redeterminations, later, foreign taxes qualify for the credit.
for more information.
• Use Form 7204 to consent to extend the time to assess tax U.S. citizens living in certain treaty countries may be able
related to contested foreign income taxes, if you are electing to take an additional foreign tax credit for foreign tax imposed
to claim a provisional foreign tax credit for the contested on certain items of income from the United States. See Tax
foreign income taxes. Treaties in Pub. 514 for details. If this applies to you, use the
worksheet near the end of Pub. 514 to help you figure this
additional credit.

2 Instructions for Form 1116 (2023)

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If you make the election under section 962 to be taxed at claim a foreign tax credit for the withholding tax on these
corporate rates on the amount you must include in gross dividends.
income under sections 951(a) and 951A(a) from your 7. Foreign taxes withheld on income or gain (other than
controlled foreign corporations (CFCs), you can claim the dividends) from property if you haven't held the property for at
credit based on your share of foreign taxes paid or accrued least 16 days within the 31-day period that begins 15 days
by the CFC. If you make this election, you must claim the before the date on which the right to receive the payment
credit by filing Form 1118. You must also still file Form 1116 arises. See section 901(l) or Pub. 514.
to claim the credit for other foreign taxes you paid or
accrued. For more information on how to complete your 8. Foreign taxes withheld on income or gain (other than
Form 1116 and Form 1118 when making this election, see dividends) from property to the extent you have to make
sections 960 and 962 and Pub. 514. related payments on positions in substantially similar or
related property.
Foreign Taxes Not Eligible for a Credit 9. Foreign taxes that are used to provide, directly or
You can't take a credit for the following foreign taxes. indirectly, a subsidy to you, a person or business related to
you, or any party transacting with you.
1. Taxes paid to a foreign country that you don't legally
owe, including amounts eligible for refund by the foreign 10. Taxes paid or accrued to a foreign country in
country. If you don't exercise your available remedies to connection with the purchase or sale of oil or gas extracted in
reduce the amount of foreign tax to what you legally owe, a that country if you don't have an economic interest in the oil
credit for the excess amount isn't allowed. The amount of tax or gas, and the purchase price or sales price is different from
actually withheld by a foreign country isn't necessarily 100% the fair market value of the oil or gas at the time of the
creditable. See Regulations section 1.901-2(e)(2)(i). purchase or sale.
Example. Country X withholds $25 of tax from a payment 11. Foreign taxes paid or accrued on income for which you
made to you. Under the income tax treaty between the United are claiming an exclusion on Form 8873, Extraterritorial
States and Country X, you owe only $15 and can claim a Income Exclusion. However, see section 943(d) for an
refund from Country X for the other $10. Only $15 is eligible exception for certain withholding taxes.
for the foreign tax credit (whether or not you apply for a 12. The disqualified portion of any foreign tax paid or
refund). accrued in connection with a covered asset acquisition.
2. Taxes paid to a foreign country that are offset or Covered asset acquisitions include certain acquisitions that
reduced by a tax credit. This includes foreign taxes offset or result in a stepped-up basis for U.S. tax purposes. For more
reduced by a tax credit that is refundable to you in cash only information, see section 901(m) and the regulations under
if an excess credit remains after offsetting your foreign that section, including Treasury Decision 9895, 2020-15
income tax liability as well as a tax credit purchased from I.R.B. 565, available at IRS.gov/irb/2020-15_IRB#TD-9895.
another taxpayer. See Regulations section 1.901-2(e)(2)(ii). 13. Foreign taxes disallowed under section 965(g) and
However, if the foreign income taxes are offset or reduced by Regulations section 1.965-5.
a tax credit that is fully refundable to you in cash at your
option, without having to first offset your foreign income tax You can't take a credit for any interest or penalties you
must pay.
liability, you can claim a foreign tax credit against your U.S.
income tax for those foreign taxes. See Regulations section For more information, see Foreign Taxes for Which You
1.901-2(e)(2)(iii). Cannot Take a Credit in Pub. 514.
3. Taxes imposed by a foreign country only because you
could claim a foreign tax credit against the U.S. tax liability for Foreign Currency Conversion
such foreign income taxes paid or accrued. Report all amounts in U.S. dollars except where specified
4. Taxes imposed by and paid to certain foreign otherwise in Part II. If you have to convert from foreign
countries. These countries are those designated by the currency, attach a detailed explanation of how you figured the
Secretary of State as countries that repeatedly provide conversion rate.
support for acts of international terrorism, countries with If you take a credit for taxes paid, the conversion rate is the
which the United States doesn't have or doesn't conduct rate of exchange in effect on the day you paid the foreign
diplomatic relations, or countries whose governments aren't taxes (or on the day the tax was withheld). If you receive a
recognized by the United States and aren't otherwise eligible refund of foreign taxes paid, the conversion rate is the rate in
to purchase defense articles or services under the Arms effect when you paid the taxes, not when you receive the
Export Control Act. Pub. 514 contains a list of these refund.
countries.
5. Foreign taxes withheld on a dividend from a If you choose to account for foreign income taxes on an
corporation, if you haven't held the stock for at least 16 days accrual basis, you must generally use the average exchange
within the 31-day period that begins 15 days before the rate for the tax year to which the taxes relate. However, you
ex-dividend date. This required holding period is greater for can't do so if any of the following apply.
preferred-stock dividends attributable to periods totaling 1. The foreign taxes are actually paid more than 2 years
more than 366 days. See section 901(k)(3) or Pub. 514. after the close of the tax year to which they relate.
6. Foreign taxes withheld on a dividend to the extent that 2. The foreign taxes are actually paid in a tax year prior to
you have to make related payments on positions in the year to which they relate.
substantially similar or related property. 3. The foreign tax liability is denominated in any
Example. You receive a dividend subject to foreign inflationary currency.
withholding tax. You are obligated to pay someone else an Accrued foreign taxes not eligible for conversion at the
amount equal to all these dividends you receive. You can't yearly average exchange rate must be converted using the

Instructions for Form 1116 (2023) 3

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exchange rate on the date of payment of the tax. However, 5. There is a change in foreign tax liability that affects the
accrued but unpaid foreign taxes denominated in inflationary amount of distributions or inclusions under section 951,
currency must be translated into U.S. dollars using the 951A, or 1293, or affects the application of the high-tax
exchange rate on the last day of the U.S. tax year to which exception described in section 954(b)(4).
those taxes relate. 6. For taxes taken into account when accrued but
translated into dollars on the date of payment, the dollar
Inflationary currency. Inflationary currency means the value of the accrued tax differs from the dollar value of the tax
currency of a country in which there is cumulative inflation paid because of fluctuations in the exchange rate between
during the 36 calendar months immediately preceding the the date of accrual and the date of payment. However, no
last day of the tax year of at least 30%, as determined by redetermination is required if the change in foreign tax liability
reference to the consumer price index of the country listed in for each foreign country is solely attributable to exchange rate
the monthly issues of International Financial Statistics, or a fluctuation and is less than the smaller of:
successor publication, of the International Monetary Fund.
a. $10,000, or
Election to use exchange rate on date paid. If you have
b. 2% of the total dollar amount of the foreign tax initially
accrued foreign taxes that you are otherwise required to
accrued for that foreign country for the U.S. tax year.
convert using the average exchange rate, you can elect to
use the exchange rate in effect on the date the foreign taxes In this case, you must adjust your U.S. tax in the tax year in
are paid if the taxes are denominated in a nonfunctional which the accrued foreign taxes are paid.
foreign currency. If any of the accrued taxes are unpaid, you
must translate them into U.S. dollars using the exchange rate Reporting requirements. If any of the above foreign tax
on the last day of the U.S. tax year to which those taxes redeterminations occur after you file your tax return, and the
relate. Once made, the election applies to the tax year for foreign tax redeterminations change the amount of U.S. tax
which made and all subsequent tax years unless revoked due for any tax year, you must generally file Form 1040-X,
with the consent of the IRS. It must be made by the due date Amended U.S. Individual Income Tax Return, or other
(including extensions) for filing the tax return for the first tax amended return, to notify the IRS so that your U.S. tax for the
year to which the election applies. Make the election by year or years affected can be redetermined. If you have a
attaching a statement to the applicable tax return. foreign tax redetermination that results in an increase in your
U.S. tax liability for any year, note in the explanation of
Special rules for a qualified business unit (QBU). If you changes section of your amended tax return (for example,
have a QBU, see Pub. 514 for special rules for converting Form 1040-X, Part II), “This amended return and Form 1116
foreign income and taxes into U.S. dollars. You may have a are for a change in foreign tax credit that increases U.S. tax
QBU if you own and operate a business or are self-employed liability.” Complete and attach to Form 1040-X (or other
in a foreign country. amended return) a revised Form 1116 for the tax year(s)
affected and a statement that contains information sufficient
Foreign Tax Redeterminations for the IRS to redetermine your U.S. tax liability. In some
If you claim a credit for foreign taxes paid, and you receive a cases, you may not have to file Form 1040-X or attach Form
refund of all or part of those taxes in a later year, you must file 1116. See Pub. 514 for more information, including
an amended return reducing the taxes credited by the exceptions. An increase in your U.S. tax liability as a result of
amount refunded. a foreign tax redetermination is excepted from the general
statute of limitations against assessment and collection. See
If you claim the foreign tax credit based on foreign taxes sections 6501(c)(5) and 905(c).
accrued instead of foreign taxes paid, your foreign tax credit
and U.S. tax liability must be redetermined in any of the Schedule C (Form 1116). In addition to filing an amended
following situations (foreign tax redeterminations). return with Form 1116 and attached statement for your tax
1. Your accrued taxes when paid differ from the amount year(s) for which your U.S. tax liability is changed as a result
you claimed as a credit (including corrections to accrued tax of the foreign tax redetermination, you must file Schedule C
amounts to reflect final foreign tax liability and additional tax (Form 1116) with your current year tax return summarizing
you pay after the close of the tax year to which the tax the foreign tax redeterminations that occurred that year that
relates). relate to prior tax years. You must file Schedule C (Form
1116) for each applicable separate category of income.
2. You don't pay the accrued taxes within 24 months after
the close of the tax year to which they relate. If a foreign tax redetermination doesn't change the amount
If this applies to you, you must reduce the credit previously of U.S. tax due for any tax year, you don't need to file an
claimed by the amount of the unpaid taxes. You won't be amended return and may instead notify the IRS of the
allowed a credit for the unpaid taxes until you pay them. redetermination by attaching for each applicable separate
When you later pay the accrued taxes, a new tax category of income a completed Schedule C (Form 1116) to
redetermination occurs and you must translate the taxes into the original return for your tax year in which the foreign tax
U.S. dollars using the exchange rate as of the date they were redetermination occurs. See the Instructions for Schedule C
paid. The foreign tax credit is allowed for the year to which (Form 1116) for additional information.
the foreign tax relates. See Foreign Currency Conversion, Contested foreign income tax liability. In general, you
earlier. can’t claim a credit for a contested foreign income tax liability
3. After you pay the accrued taxes, you receive a full or until the contest is resolved and the amount of the liability is
partial refund of them. finally determined.
4. You change your election and claim a foreign tax credit If you use the cash method of accounting, you can’t claim
for foreign income taxes that you previously deducted, or you a credit for a contested foreign income tax liability (or any
change your election and claim a deduction for foreign portion of it) that has been remitted to the foreign country
income taxes that you previously credited. until the contest is resolved and the tax is considered paid for

4 Instructions for Form 1116 (2023)

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purposes of section 901. You can claim a credit once the If you don't notify the IRS of a foreign tax refund or
contest is resolved and the foreign income tax liability is ! change in the dollar amount of foreign taxes paid or
finally determined. The tax is considered paid in the tax year CAUTION accrued, you will have to pay a penalty unless you
in which the payment was made. See Regulations section can show that the failure to notify the IRS is due to
1.905-1(c)(2). Alternatively, you can elect to claim a reasonable cause and not due to willful neglect.
provisional credit for contested taxes, as described later.
If you elected the accrual method of accounting for Income From Sources Outside the
claiming the foreign tax credit (see Part II—Foreign Taxes United States
Paid or Accrued, under Specific Instructions, later), you can’t
Foreign source income generally includes, but isn't limited to,
claim a credit for a contested foreign income tax liability (or
the following.
any portion of it) that has been remitted to the foreign country
until the contest is resolved and the tax is considered paid for • Compensation for services performed outside the United
States.
purposes of section 901. You can claim a credit once the
contest is resolved and the foreign income tax liability is • Interest income from a payer located outside the United
States.
finally determined and paid. The tax is considered to accrue
in the foreign tax year to which the contested foreign income • Dividends from a corporation incorporated outside the
United States.
tax liability is related (“relation-back year”). See Regulations
section 1.905-1(d)(3). Alternatively, you can elect to claim a • Subpart F income inclusions and section 951A category
income inclusions.
provisional credit for contested taxes. See the next paragraph
for details. • Gain on the sale of nondepreciable personal property you
sold while maintaining a tax home outside the United States,
Election to claim a provisional credit for contested tax- if you paid a tax of at least 10% of the gain to a foreign
es. If you use the cash method of accounting, you may elect country.
to claim a credit for a contested foreign income tax liability (or
Foreign source income generally doesn't include gain
any portion of it) in the tax year you pay the contested
realized on the sale or exchange of personal property by a
amount (or any portion of it) to the foreign country, even
U.S. resident, as defined in section 865(g).
though the liability isn’t finally determined and isn’t
considered an amount of tax paid for purposes of section Special rules apply in determining the source of income
901. This election is available only for contested foreign from the sale of inventory; sale of depreciable property used
income taxes that are paid in a tax year in which you elected in a trade or business; sale of intangible property such as a
to claim a credit under section 901(a), instead of a deduction patent, copyright, or trademark; and transportation services
under section 164(a)(3), for foreign income taxes that accrue that begin or end in the United States or a U.S. possession.
or are paid in that year. To make the election, you must file See Pub. 514 for more information.
Form 1116 for the tax year the contested liability is paid and Compensation for labor or personal services as an em-
Form 7204. In addition, for each subsequent tax year up to ployee. If you are an employee and receive compensation
and including the tax year in which the contest is resolved, for labor or personal services performed both inside and
you must annually file Schedule C (Form 1116). Any portion outside the United States, special rules apply in determining
of a contested foreign income tax liability for which a the source of the compensation. Compensation (other than
provisional credit is claimed that is subsequently refunded by fringe benefits) is sourced on a time basis. Fringe benefits
the foreign country is a foreign tax redetermination under (such as housing and education) are sourced on a
Regulations section 1.905-3(a). geographical basis. Or you may be able to use an alternative
If you are an accrual basis taxpayer or if you elected to basis to determine the source. If you use an alternative basis,
claim your foreign tax credit on an accrual basis, you may you may have to check the box on line 1b (discussed later).
elect to claim a credit for a contested foreign income tax See Pub. 514 for more information.
liability (or any portion of it) in the relation-back year when the
contested amount (or a portion of it) is paid to the foreign Categories of Income
country, even though the liability isn’t finally determined and Use a separate Form 1116 to figure the credit for each
hasn’t accrued. This election is available only for contested category of foreign source income listed above Part I of Form
foreign income taxes that relate to a tax year in which you 1116. The following instructions tell you what kind of income
elected to claim a credit under section 901(a), instead of a to include in each category. For more information, see Pub.
deduction under section 164(a)(3), for foreign income taxes 514, section 904, and Regulations sections 1.904-4 and
that accrue or are paid in that year. To make the election, you 1.904-5.
must file Form 1116 and Form 7204 with your return (typically
an amended return) for the tax year to which the contested a. Section 951A Category Income
tax relates. In addition, for each subsequent tax year up to Section 951A category income includes any amount included
and including the tax year in which the contest is resolved, in gross income under section 951A (other than passive
you must annually file Schedule C (Form 1116). Any portion category income). Section 951A category income is
of a contested foreign income tax liability for which a otherwise referred to as “global intangible low-taxed income
provisional credit is claimed that is subsequently refunded by (GILTI)” and is included by U.S. shareholders of certain
the foreign country is a foreign tax redetermination under CFCs. See Pub. 514 for additional details.
Regulations section 1.905-3(a).
b. Foreign Branch Category Income
Foreign branch category income consists of the business
profits of U.S. persons that are attributable to one or more
qualified business units (QBUs) in one or more foreign
countries. Foreign branch category income doesn’t include

Instructions for Form 1116 (2023) 5

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any passive category income. See Pub. 514 for further derived from each sanctioned country is subject to a
information. separate foreign tax credit limitation. Therefore, you must use
a separate Form 1116 for income derived from each
c. Passive Category Income sanctioned country. Because no credit is allowed for taxes
Passive category income consists of passive income and paid to sanctioned countries, you would generally complete
specified passive category income. Form 1116 for this category only through line 17.
Passive category income doesn't include gain from the Note. A foreign tax credit may be claimed for foreign taxes
sale of inventory or property held primarily for sale to paid or accrued with respect to section 901(j) income if such
customers in the ordinary course of your trade or business; tax is paid or accrued to a country other than a sanctioned
gain from commodities hedging transactions; and active country. For example, if a U.S. citizen resident in a
business gains or losses of producers, processors, non-sanctioned country pays a residence-based income tax
merchants, or handlers of commodities. It may also not in that country on income derived from business activities in a
include dividends, interest, rents, or royalties received from a sanctioned country, those foreign taxes would be eligible for
CFC in which you are a U.S. shareholder who owns 10% or a foreign tax credit. In this situation, you would continue
more of the total voting power or the total value of all classes completing Form 1116 and not stop at line 17.
of the corporation's stock.
Sanctioned countries are those designated by the
Passive income. Passive income generally includes Secretary of State as countries that repeatedly provide
dividends, interest, royalties, rents, annuities, excess of gains support for acts of international terrorism, countries with
over losses from the sale of property that produces such which the United States doesn't have or doesn't conduct
income or of non-income-producing investment property, and diplomatic relations, or countries whose governments aren't
excess of gains over losses from foreign currency or recognized by the United States and aren't otherwise eligible
commodities transactions. Capital gains not related to the to purchase defense articles or services under the Arms
active conduct of a trade or business are also generally Export Control Act. Pub. 514 contains a list of these
passive income. countries.
Passive income doesn't include export financing interest,
If you paid taxes to a country that ceased to be a
active business rents and royalties, or high-taxed income.
sanctioned country during the tax year, see Pub. 514 for
High-taxed income is income if the foreign taxes you paid on
details on how to figure the foreign tax credit for the period
the income (after allocation of expenses) exceed the highest
that begins after the end of the sanctions.
U.S. tax that can be imposed on the income.
Passive income also doesn't include financial services Presidential waiver. The President of the United States has
income derived by a financial services entity. You are a the authority to waive the denial of the credit with respect to a
financial services entity if you are predominantly engaged in sanctioned country if:
the active conduct of a banking, insurance, financing, or • The waiver is in the national interest of the United States
similar business for the tax year. Financial services income of and will expand trade and investment opportunities for U.S.
a financial services entity generally includes income derived companies in the sanctioned country; and
in the active conduct of a banking, financing, insurance, or • The President reports to Congress, not less than 30 days
similar business. If you qualify as a financial services entity before the waiver is granted, the intention to grant the waiver
because you treat certain items of income as active financing and the reason for the waiver.
income under Regulations section 1.904-4(e)(2)(i)(Y), you
must show the type and amount of each item on an f. Certain Income Re-Sourced by Treaty
attachment to Form 1116. If a sourcing rule in an applicable income tax treaty treats
U.S. source income as foreign source, and you elect to apply
Specified passive category income. Dividends from a the treaty, the income will be treated as foreign source.
domestic international sales corporation (DISC) or former
DISC to the extent they are treated as foreign source income, Important: You must compute a separate foreign tax credit
and certain distributions from a former foreign sales limitation for any income for which you claim benefits under a
corporation (FSC) are specified passive category income. treaty, using a separate Form 1116 for each amount of
re-sourced income from a treaty country. This rule doesn’t
d. General Category Income apply to income that is re-sourced by reason of the relief from
General category income is income that isn't section 951A double taxation rules in any U.S. income tax treaty that is
category income, foreign branch category income, passive solely applicable to U.S. citizens who are residents of the
category income, or income described in categories e, f, and foreign treaty country. See sections 865(h), 904(d)(6), and
g, discussed later. General category income may include the 904(h)(10) and the regulations under those sections
following. (including 1.904-4(k)) for any grouping rules and other
• Wages, salary, and overseas allowances of an individual exceptions. Add the amounts from line 24 of each separate
as an employee. Form 1116 and enter the total on line 30 of your summary
• Income earned in the active conduct of a trade or Form 1116 (that is, the Form 1116 for which you are
business. completing Part IV). In addition, you may be required to file
• Gains from the sale of inventory or depreciable property Form 8833, Treaty-Based Return Position Disclosure Under
used in a trade or business. See Pub. 514 for additional Section 6114 or 7701(b), for the re-sourced income.
details.
g. Lump-Sum Distributions
e. Section 901(j) Income You can take a foreign tax credit for taxes you paid or accrued
No credit is allowed for foreign taxes imposed by and paid or on a foreign source lump-sum distribution from a pension
accrued to certain sanctioned countries. However, income plan. Special formulas may be used to figure a separate tax

6 Instructions for Form 1116 (2023)

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Worksheet for Lump-Sum Distributions                                                       Keep for Your Records
1.    Enter the amount from Form 1116, line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         1.  
2.    Enter the sum of the amounts from Form 4972, lines 6 and 12, that are from foreign sources. Also 
      enter this amount on Form 1116, line 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         2.  
3.    Enter the sum of the amounts from Form 4972, lines 6 and 12, that are from all sources (both U.S. 
      and foreign). Also enter this amount on Form 1116, line 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    3.  
4.    Divide line 2 by line 3. Enter the result as a decimal (rounded to at least four places) here and on 
      Form 1116, line 19. If line 2 is equal to or more than line 3, enter “1” . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    4.  
5.    Enter the amount from Form 4972, line 30. Also include this amount on Form 1116, line 20 . . . . . . . . .                                                          5.  
                      Don't include the amount on line 5 above in the tax you enter on line 20 of any other 
      CAUTION!        Form 1116 you are filing. 

6.    Multiply line 5 by line 4. Enter the result here and on Form 1116, line 21 . . . . . . . . . . . . . . . . . . . . . . . .                                          6.  
7.    Enter the smaller of line 1 or line 6 here and on Form 1116, line 24. To the left of line 24, enter 
      “LSD” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.  

on a qualified lump-sum distribution for the year in which the  General Information for Partners and S 
distribution is received. See Pub. 575 for more information.    Corporation Shareholders
If you are able to elect, and do elect, to figure your U.S. tax Less-than-10% limited partners.             If you are a limited 
on a lump-sum distribution using Form 4972, Tax on              partner and you own a less-than-10% interest (by value) in 
Lump-Sum Distributions, a separate foreign tax credit           the partnership, you must generally categorize your 
limitation applies. Use a separate Form 1116. On this           distributive share of foreign source income and deductions 
separate Form 1116, check box g above Part I. Skip Part I.      from that partnership as passive income. See the Partner’s 
Complete Part II showing only foreign taxes that are            Instructions for Schedule K-3 (Form 1065) and Regulations 
attributable to the lump-sum distribution. Then, complete the   section 1.904-4(n) for more details and exceptions.
Worksheet for Lump-Sum Distributions to figure the amounts 
to enter in Part III.                                           Reporting amounts on Form 1116.                                                                           Include amounts 
                                                                reported to you on Schedule K-3 with any other amounts 
Special Rules                                                   reportable on Form 1116 using:
                                                                • A separate Form 1116 for each category of income, and
Look-Through Rules                                              • A separate column in Part I and a separate line in Part II for 
Certain income received or accrued by you as a                  each country or possession.
10%-or-more U.S. shareholder in a CFC is treated as income      Note. For any item that isn't reported by country on 
in one of the separate categories listed under Categories of    Schedule K-3, you may use any reasonable method to 
Income, earlier. For example, subpart F inclusions, dividends,  allocate it between countries or possessions on Form 1116.
interest, rents, and royalties from a CFC are only treated as 
passive category income to the extent they are attributable to 
passive category income of the CFC. See Regulations             Explanation of Certain Line Items on Schedule K-3 
section 1.904-5 for more information.                           for Forms 1065, 1120-S, and 8865
                                                                Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, 
Reporting Foreign Tax Information From 
                                                                Section 1, columns (b) through (e)—Foreign gross in-
Partnerships and S Corporations                                 come sourced at partnership or S corporation level. 
If you received a Schedule K-3 from a partnership or S          Income reported in these columns has already been sourced 
corporation that includes foreign tax information, use the      for you by the partnership or S corporation. The partnership 
rules below to report that information on Form 1116.            or S corporation has reported this income to you by country 
Note. In 2023, the partnership or S corporation may be          and by category of income. Include these amounts in Part I of 
excepted from providing Schedule K-3 to you if the              each of the applicable Forms 1116 (that is, a separate Form 
partnership or S corporation has limited foreign activity. You  1116 for each category of income you received). See the 
still have the right to request Schedule K-3 and it may provide partner and shareholder instructions for Forms 1065 and 
information that can increase your foreign tax credit. See the  1120-S, Schedule K-3, for further information.
partnership and S corporation instructions for Form 1065 and    Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, 
Form 1120-S, Schedules K-2 and K-3, and the partner and         Section 1, column (f)—Gross income sourced by part-
shareholder instructions for Forms 1065 and 1120-S,             ner or shareholder.     This column includes income from the 
Schedule K-3, available at IRS.gov/Form1065 and IRS.gov/        sale of eligible personal property (most personal property 
Form1120S, respectively, for further information.               other than inventory, depreciable property, and certain 
                                                                intangible property). See Pub. 514 for details. You must first 
                                                                determine (using the rules described next) whether the 

Instructions for Form 1116 (2023)                                                                                                                                                         7

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income in this column is U.S. source income or foreign Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
source income. Then, only enter the foreign source income in Section 2, lines 25 through 38, and 44 through 50, col-
Part I of each of the applicable Forms 1116 (that is, a umns (b) through (e)—Deductions allocated and appor-
separate Form 1116 for each category of income you tioned at partnership or S corporation level to foreign
received). source income. The partnership or S corporation has
Use the following rules to source the income reported to already allocated these expenses to foreign source income
you in this column of Schedule K-3. If you are a U.S. resident and has reported them to you by category of income. Include
(as defined next), the income is U.S. source income. If you these amounts on line 2 of each of the applicable Forms
are a nonresident (as defined later), the income is foreign 1116 (that is, a separate Form 1116 for each category of
source income. See the partner and shareholder instructions income you received). See the partner and shareholder
for Forms 1065 and 1120-S, Schedule K-3, for further instructions for Forms 1065 and 1120-S, Schedule K-3, for
information. further information.
U.S. resident. A U.S. resident is a U.S. citizen or resident Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
alien who doesn't have a tax home in a foreign country or a Section 2, lines 25 through 38, and 44 through 50, col-
nonresident alien who has a tax home in the United States. umn (f)—Other expenses. These lines in column (f)
Tax home. Generally, your tax home is the general area of include expenses (other than interest expense) of the
your main place of business, employment, or post of duty, partnership or S corporation that must be allocated and
regardless of where you maintain your family home. Your tax apportioned at the partner or shareholder level (for example,
home is the place where you are permanently or indefinitely research and experimental (R&E) expenses on line 32).
engaged to work as an employee or self-employed individual.
If you don't have a regular or main place of business because Combine your distributive share of these expenses with all
of the nature of your work, then your tax home is the place of your other like expenses, if any, and then allocate and
where you regularly live. If you don't fit either of these apportion them using the applicable rules (for example, for
categories, you are considered an itinerant and your tax R&E expenses, the rules under Regulations section
home is wherever you work. 1.861-17(f)).
Nonresident. A nonresident is any person who isn't a U.S. Forms 1065, 1120-S, and 8865, Schedule K-3, Part III,
resident. U.S. citizens and resident aliens with a foreign tax Section 1, reports information you will need to allocate and
home won't be treated as nonresidents for a sale of eligible apportion R&E expense. Forms 1065 and 8865,
personal property unless a foreign tax of 10% or more was Schedule K-3, Part III, Section 3, reports information you will
paid or accrued on the gain on the sale (or, in the case of a need to allocate and apportion the foreign-derived intangible
loss sale, a foreign tax of 10% or more would have been paid income deduction to foreign source income in separate
had the sale resulted in a gain). categories. Include expenses that you allocate to foreign
source income on line 2 of the applicable Form 1116.
Note. To help you with these rules, the partnership or S Expenses that you allocate to U.S. source income shouldn't
corporation has specifically identified the following on an be entered on any line of Part I of Form 1116. See the partner
attachment to Form 1065, 1120-S, or 8865. See and shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, Part I, box 1. Schedule K-3, for further information.
• Gains on the sale of eligible personal property for which a Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
foreign tax of 10% or more was paid or accrued. Section 2, lines 39 through 43—Interest expense. See
• Losses on the sale of eligible personal property for which a the instructions for line 4b, later, to allocate and apportion the
foreign tax of 10% or more would have been paid had the interest expense shown on these lines of Schedule K-3. In
sale resulted in a gain. applying those instructions, take into account your distributive
Include foreign source income in Part I of the applicable share of the partnership's or S corporation's gross income
Form 1116 (that is, the Form 1116 for the applicable category (for purposes of the $5,000 threshold) or your pro rata share
of income). Don't include in Part I of Form 1116 income that of the partnership's or S corporation's assets. See Forms
you determined (using these rules) to be U.S. source income. 1065, 1120-S, and 8865, Schedule K-3, Part III, Section 2, for
If the partnership or S corporation has specifically the share of the partnership's or S corporation's assets.
However, if you were a limited partner and your interest in the
! identified any capital gains or losses or unrecaptured partnership was less than 10%, see the next paragraph.
CAUTION section 1250 gain on Schedule K-3, Part II, Section 1,
line 8, or lines 11 through 15, and you have determined that Include interest expense that you allocate to foreign source
those gains or losses are foreign source, see Foreign income on line 4b of the applicable Form 1116. Don't enter in
Qualified Dividends and Capital Gains (Losses), later, before Part I of Form 1116 any interest expense that you allocate to
entering an amount in Part I of Form 1116. See the partner U.S. source income.
and shareholder instructions for Forms 1065 and 1120-S, Less-than-10% limited partners. If you are a limited
Schedule K-3, for further information. partner and you own (directly or indirectly) a less-than-10%
interest (by income) in the partnership, you may generally
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, allocate your distributive share of interest expense from that
Section 1, line 24, column (g)—Total gross income. partnership to foreign or U.S. source income based on your
Combine your distributive share of “Total gross income” from distributive share of the gross foreign or U.S. source income
Schedule K-3 with all of your other gross income and enter of that partnership. The interest expense you allocate to
the total on line 3e. Note that you must include the total for all foreign source income may generally be apportioned
countries in each column of line 3e. “Gross income from all exclusively to passive category income. However, see
sources” is a constant amount (that is, you will enter the Temporary Regulations section 1.861-9T(e)(4) for
same amount on line 3e for each column of all Forms 1116 exceptions. See the Partner’s Instructions for Schedule K-3
that you file). (Form 1065) for further information.

8 Instructions for Form 1116 (2023)

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Forms 1065 and 8865, Schedule K-3, Part III, Section 4, Qualified Dividends and Capital Gain Tax Worksheet
line 1; and Form 1120-S, Schedule K-3, Part III, Section (Individuals) Qualified Dividends Tax Worksheet (Estates ,
3, line 1—Foreign taxes. The partnership or S corporation and Trusts), and Schedule D Filers, later.
has already allocated and apportioned total foreign taxes for
you and has reported them to you by country and by category Qualified Dividends and Capital Gain Tax
of income. Include these amounts in Part II of each of the Worksheet (Individuals)
applicable Forms 1116 (that is, a separate Form 1116 for If you completed the Qualified Dividends and Capital Gain
each category of income you received). See the partner and Tax Worksheet in the Instructions for Form 1040 and you
shareholder instructions for Forms 1065 and 1120-S, don't have to file Schedule D, you may have to adjust the
Schedule K-3, for further information. amount of your foreign source qualified dividends and capital
Forms 1065 and 8865, Schedule K-3, Part III, Section 4, gain distributions.
line 2; and Form 1120-S, Schedule K-3, Part III, Section You must adjust the amount of your foreign source
3, line 2—Reduction of taxes. The partnership or S qualified dividends and capital gain distributions if both of the
corporation has already apportioned the reduction in taxes following apply.
available for credit and has reported it to you by category of Line 5 of the Qualified Dividends and Capital Gain Tax
income. Include these amounts on line 12 of each of the •
Worksheet is greater than zero.
applicable Forms 1116 (that is, a separate Form 1116 for Line 23 of the Qualified Dividends and Capital Gain Tax
each category of income you received). See the partner and •
Worksheet is less than line 24 of that worksheet.
shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information. Adjustment exception. If you qualify for the adjustment
exception, you can elect not to adjust your foreign source
Forms 1065 and 8865, Schedule K-3, Part III, Section 4, capital gain distributions and qualified dividends. You make
line 3; and Form 1120-S, Schedule K-3, Part III, Section this election by not adjusting these items. If you make this
3, line 3—Foreign tax redeterminations. The partnership election, you must elect not to adjust any of your foreign
or S corporation has already apportioned the change in source qualified dividends or capital gain distributions.
foreign income tax liability and has reported it to you by
country and by category of income. Include these amounts You qualify for the adjustment exception if you meet both
on each of the applicable Schedules C (Form 1116) (that is, a of the following requirements.
separate Schedule C (Form 1116) for each category of 1. Line 5 of the Qualified Dividends and Capital Gain Tax
income you received). See the partner and shareholder Worksheet doesn't exceed:
instructions for Forms 1065 and 1120-S, Schedule K-3, for a. $364,200 if married filing jointly or qualifying surviving
further information. spouse,
Note. See the partner and shareholder instructions for b. $182,100 if married filing separately,
Forms 1065 and 1120-S, Schedule K-3, Parts I, II, and III, for c. $182,100 if single, or
information related to foreign oil and gas taxes, high-taxed d. $182,100 if head of household.
income, partner loan transactions, foreign tax
redeterminations, and other information that may be 2. The amount of your foreign source capital gain
necessary to complete Form 1116. distributions, plus the amount of your foreign source qualified
dividends, is less than $20,000.
Foreign Qualified Dividends and If you are subject to the alternative minimum tax, see the
Capital Gains (Losses) special rules in Regulations section 1.904(b)-1(b)(3).
Qualified dividends are the amounts you entered on How to make adjustments. To adjust your foreign source
TIP Form 1040, 1040-SR, or 1040-NR, line 3a. qualified dividends or capital gain distributions, multiply your
foreign source qualified dividends or capital gain distributions
in each separate category by 0.4054 if the foreign source
If you have foreign source qualified dividends or foreign qualified dividends or capital gain distributions are taxed at a
source capital gains (including any foreign source capital rate of 15%, and by 0.5405 if they are taxed at a 20% rate.
gain distributions) or losses, you may be required to make Include the results on line 1a of the applicable Form 1116.
certain adjustments to those amounts before taking them into
account on line 1a (gross income) or line 5 (losses). You adjust your foreign source qualified dividends or
capital gain distributions taxed at the 0% rate by not
If you completed the Qualified Dividends and Capital Gain including them on line 1a.
Tax Worksheet in the Instructions for Form 1040, and aren't No adjustments required. If you aren't required to adjust
required to file Schedule D, see Qualified Dividends and the amount of your foreign source qualified dividends or
Capital Gain Tax Worksheet (Individuals) next to determine capital gain distributions, or you qualify for the adjustment
the adjustments you may be required to make. If you exception and elect not to adjust these items, include the
completed the Qualified Dividends Tax Worksheet in the amount of your foreign source qualified dividends and capital
Instructions for Form 1041, see Qualified Dividends Tax gain distributions in each separate category (without
Worksheet (Estates and Trusts), later, to determine the adjustment) on line 1a of the applicable Form 1116.
adjustments you may be required to make. If you are required
to file Schedule D, see Schedule D Filers, later, to determine Qualified Dividends Tax Worksheet (Estates and
the adjustments you may be required to make.
Trusts)
You can elect not to make the adjustments to your If you completed the Qualified Dividends Tax Worksheet in
qualified dividends and capital gains if you qualify for the the Instructions for Form 1041, you must adjust the amount of
adjustment exception. See Adjustment exception under your foreign source qualified dividends if:

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• Line 5 of the Qualified Dividends Tax Worksheet is greater You qualify for the adjustment exception if you meet both
than zero, and of the following requirements.
• Line 21 of the Qualified Dividends Tax Worksheet is less 1. Line 5 of the Qualified Dividends and Capital Gain Tax
than line 22 of that worksheet. Worksheet in the Form 1040 instructions or line 18 of the
Adjustment exception. If you qualify for the adjustment Schedule D Tax Worksheet in the Schedule D (Form 1040)
exception, you can elect not to adjust your foreign source instructions is less than or equal to:
qualified dividends. You make this election by not adjusting a. $364,200 if married filing jointly or qualifying surviving
these dividends. If you make this election, you must elect not spouse,
to adjust any of your foreign source qualified dividends. b. $182,100 if married filing separately,
See section 904(b) and the regulations issued under that
Code section to determine if you qualify for the adjustment c. $182,100 if single, or
exception. d. $182,100 if head of household.
How to make adjustments. To adjust your foreign source 2. The amount of your foreign source net capital gain,
qualified dividends, multiply your foreign source qualified plus the amount of your foreign source qualified dividends, is
dividends in each separate category by 0.4054 if the foreign less than $20,000.
source qualified dividends are taxed at a rate of 15%, and by For trusts and estates, see section 904(b) and the
0.5405 if they are taxed at a 20% rate. Include the results on regulations issued under that Code section to determine if
line 1a. you qualify for the adjustment exception.
You adjust your foreign source qualified dividends taxed at If you are subject to the alternative minimum tax, see the
the 0% rate by not including them on line 1a. special rules in Regulations section 1.904(b)-1(b)(3).
Don't adjust the amount of any foreign source Note. Your foreign source net capital gain is the excess of
your net long-term capital gain from foreign sources over your
! qualified dividends that you elected to include on
CAUTION Form 4952, line 4g. net short-term capital loss from foreign sources. Ignore any
long-term capital gains you elected to include on Form 4952,
No adjustment required. If you aren't required to make line 4g, in determining your foreign source net capital gain.
adjustments to your foreign source qualified dividends (or Ignore any qualified dividends you elected to include on Form
you qualify for the adjustment exception and you elected not 4952, line 4g, in determining the amount of your foreign
to adjust these dividends), include your foreign source source qualified dividends.
qualified dividends on line 1a of the applicable Form 1116 How to make adjustments. To adjust your foreign source
without adjustment. qualified dividends, multiply your foreign source qualified
dividends in each separate category by 0.4054 if the foreign
Schedule D Filers source qualified dividends are taxed at a rate of 15%, and by
Note. Throughout these instructions, references to 0.5405 if they are taxed at a 20% rate. Include the results on
Schedule D (Form 1041) are for estates and trusts only. line 1a of the applicable Form 1116.
Adjustments to foreign qualified dividends. If you are You adjust your foreign source qualified dividends taxed at
required to file Schedule D (Form 1040), you must adjust the the 0% rate by not including them on line 1a.
amount of your foreign source qualified dividends that you Don't adjust the amount of any foreign source
include on line 1a of Form 1116 if one of the following applies ! qualified dividends that you elected to include on
to you. CAUTION Form 4952, line 4g.
1. You figured your tax using the Qualified Dividends and
No adjustment required. If you aren't required to adjust
Capital Gain Tax Worksheet in the Form 1040 instructions,
your foreign source qualified dividends (or you qualify for the
line 5 of that worksheet is greater than zero, and line 23 of
adjustment exception and elect not to adjust these
that worksheet is less than line 24.
dividends), include on line 1a of Form 1116 the full amount of
2. You figured your tax using Schedule D (Form 1041), foreign source qualified dividends without adjustment.
line 27 of Schedule D is greater than zero, and line 43 of
Schedule D is less than line 44. Adjustments to foreign capital gains and losses. You
must use Worksheet A Worksheet B, , or the instructions
3. You figured your tax using the Schedule D Tax under Capital Gains and Losses in Pub. 514 to determine the
Worksheet (in the Schedule D (Form 1040) instructions), adjustments you must make to your foreign capital gains or
line 18 of the Schedule D Tax Worksheet is greater than zero, losses. Read the instructions that follow to see if you qualify
and line 45 of the Schedule D Tax Worksheet is less than to use Worksheet A or Worksheet B. If you don't qualify to
line 46. use Worksheet A or Worksheet B, use the instructions under
4. You figured your tax using the Schedule D Tax Capital Gains and Losses in Pub. 514 to determine the
Worksheet (in the Schedule D (Form 1041) instructions), adjustments you must make.
line 17a of the Schedule D Tax Worksheet is greater than
zero, and line 42 of the Schedule D Tax Worksheet is less Before you complete Worksheet A or Worksheet B,
than line 43. ! you must reduce each foreign source long-term
CAUTION capital gain by the amount of that gain you elected to
Adjustment exception. If you qualify for the adjustment include on Form 4952, line 4g. The gain you elected to
exception, you can elect not to adjust your foreign source include on Form 4952, line 4g, must be entered directly on
qualified dividends. You make this election by not adjusting line 1a of the applicable Form 1116 without adjustment.
these dividends or your foreign capital gains (or losses). If
you make this election, you must elect not to adjust any of Worksheet A. You can use Worksheet A to determine the
your foreign source qualified dividends. adjustments you must make to your foreign source capital
gains or losses if you have foreign source capital gains or

10 Instructions for Form 1116 (2023)

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losses in no more than two separate categories and any of to more than three countries or possessions, attach
the following apply. additional sheets following the format of Parts I and II.
• You qualify for the adjustment exception discussed earlier
Foreign tax credit splitting event. If you had a foreign tax
under Adjustments to foreign qualified dividends under
credit splitting event in a previous year and you are taking the
Schedule D Filers and you didn't make any adjustments to
related income into account in 2023, enter “909 income” on
your foreign qualified dividends (if any).
line i for that income instead of the country or possession
• Line 15 or 16 of Schedule D (Form 1040) (line 18a or 19 of
name.
Schedule D (Form 1041)) is zero or a loss.
• You figured your tax using the Qualified Dividends and Section 863(b) gross income and deductions. You don't
Capital Gain Tax Worksheet in the Form 1040 instructions need to report section 863(b) income (certain income from
and (a) line 3 of that worksheet is zero or less, (b) line 5 of services or inventory that is partly from U.S. source and partly
that worksheet is zero, or (c) line 23 of that worksheet is from foreign source) on a per-country basis. Total all section
equal to or greater than line 24. 863(b) foreign source income in the applicable category and
• You figured your tax using Schedule D (Form 1041) and (a) enter the total in a single column in Part I. Enter “863(b)” on
line 27 of Schedule D is zero; (b) line 22 of Schedule D minus line i. Total all section 863(b) deductions in the applicable
the amount on Form 4952, line 4e, that you elected to include category and in the same column enter the totals on lines 2
on Form 4952, line 4g, is zero or less; or (c) line 43 is equal to through 6. Total all foreign taxes imposed on section 863(b)
or greater than line 44. income and enter the total on a single line in Part II for the
• You figured your tax using the Schedule D Tax Worksheet applicable category.
(in the Schedule D (Form 1040) instructions) and (a) line 18 Regulated investment company (RIC) pass-through
is zero, (b) line 9 is zero or less, or (c) line 45 is equal to or amounts. You don't need to report income passed through
greater than line 46. from a mutual fund or other RIC on a country-by-country
• You figured your tax using the Schedule D Tax Worksheet basis. Total all income, in the applicable category, passed
(in the Schedule D (Form 1041) instructions) and (a) line 17a through from the mutual fund or other RIC and enter the total
is zero, (b) line 9 is zero or less, or (c) line 42 is equal to or in a single column in Part I. Enter “RIC” on line i. Total all
greater than line 43. foreign taxes passed through and enter the total on a single
Complete Worksheet A only once, even if you have capital line in Part II for the applicable category.
gains or losses in two separate categories. Keep the
completed Worksheet A for your records. Don't file Inclusions under section 951A. Because computations for
Worksheet A with your tax return. inclusions under section 951A are reported on separate
Forms 8992, U.S. Shareholder Calculation of Global
Capital losses are deductible only up to $3,000 ($1,500 if Intangible Low-Taxed Income, you don't need to report those
married filing separately) of ordinary income. inclusions on a country-by-country basis. Enter the total
Worksheet B. If you don't qualify to use Worksheet A , use inclusion in a single column in Part l and enter “951A” on line
Worksheet B to determine the adjustments you must make to i.
your foreign source capital gains or losses if:
• You have foreign source capital gains or losses in no more High-taxed income. Passive income doesn't include
than two separate categories, high-taxed income. High-taxed income is income if the
• You didn't complete the Unrecaptured Section 1250 Gain foreign taxes you paid on the income (after allocation of
Worksheet or the 28% Rate Gain Worksheet in the expenses) exceed the highest U.S. tax that can be imposed
Schedule D instructions, and on the income. See Regulations section 1.904-4(c) for more
• You don't have any capital gains taxed at a rate of 0% or information. If you have passive income that is high-taxed
20%. income, use a separate column in Part I. Enter “HTKO” on
line i of Forms 1116 for passive category income and the
Complete Worksheet B only once, even if you have capital other category of income to which such passive category
gains or losses in two separate categories. Keep the income is reclassified. On your Form 1116 for passive
completed Worksheet B for your records. Don't file category income, passive income that is treated as another
Worksheet B with your tax return. category of income because it is high taxed should be
Capital losses are deductible only up to $3,000 ($1,500 if included on line 1a in the column for the country entered on
married filing separately) of ordinary income. line i. Also, enter the high-taxed income in the “HTKO”
column on line 1a as a negative number. On your Form 1116
for the other category of income, the high-taxed income
Specific Instructions should be entered as a positive number on line 1a in the
“HTKO” column. Don't enter any amounts on lines 2 through
Part I—Taxable Income or Loss From 5 for your “HTKO” column. Add all deductions that are
definitely related or apportioned to passive income that is
Sources Outside the United States treated as another category of income because it is high
Part I must be completed by all filers unless taxed and enter the total amount of those deductions on
line 6 in the appropriate “HTKO” column. Enter the amount as
! specifically indicated otherwise in these instructions. a negative number in the “HTKO” column on your Form 1116
CAUTION
for passive category income. Enter the amount as a positive
Line i—Foreign Country or U.S. Possession number in the “HTKO” column on your Form 1116 for the
other category of income. See the instructions for line 13,
Generally, if you received income from, or paid taxes to, more
later.
than one foreign country or U.S. possession, report
information on a country-by-country basis on Form 1116,
Parts I and II. Use a separate column in Part I and a separate
line in Part II for each country or possession. If you paid taxes

Instructions for Form 1116 (2023) 11

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Worksheet A (See instructions.)                                                                                      Keep for Your Records
                                                                                                        Category #1  Category #2

                                                            Specify ▶                                                

1. Separate category capital gain or (loss) . . . . . . . . . . . . . . . . . . . . .               1.               

2. Foreign source capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2.  

3. Capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.  

4. Total U.S. capital loss adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      4.  

5. Adjusted separate category capital gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           5.  

6. U.S. capital loss adjustment factor. (For each separate category, 
   divide line 1 by line 2 and round off the result 
   to at least four decimal places.) . . . . . . . . . . . . . . . . . . . . . . . . . . .          6.               

7. U.S. capital loss adjustment. (For each separate category, multiply 
   line 4 by line 6.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.               

8. Adjusted separate category capital gain. (For each 
   separate category, subtract line 7 from line 1. Enter 
   the result here and include the result on line 1a of the 
   applicable Form 1116.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         8.               

                                                    Instructions for Worksheet A
Line 1. For each separate category for which you have foreign source capital gains or losses, combine your foreign source capital gains 
and losses in that separate category and enter the result on line 1. Show a loss on line 1 of this worksheet as a negative amount and include 
the loss on line 5 of the Form 1116 you are filing for that separate category. 
Line 2. Combine the amounts entered on line 1. If the result is zero or less, don't complete the rest of the worksheet. Instead, for each 
separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you are filing 
for that separate category.
Line 3. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form 4952, line 4g. If 
the result is zero or less, enter -0-. 
Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that Schedule D. If 
the result is zero or less, enter -0-.
Line 4. Subtract line 3 from line 2 and enter the result on line 4. If the result is zero or less, don't complete the rest of the worksheet. Instead, 
for each separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you 
are filing for that separate category. 
Line 5.
•  If both separate categories have a positive amount on line 1, skip line 5 and go to line 6.
•  If only one separate category has a positive amount on line 1, subtract line 4 from that positive amount. Enter the result here and include 
the result on line 1a of the Form 1116 you are filing for that separate category. Skip lines 6–8 of this worksheet.

12                                                                                                                   Instructions for Form 1116 (2023)

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Worksheet B (See instructions.) Keep for Your Records
Category #1 Category #2

Specify ▶ ____________ Specify ▶ __________
(1) (2) (3) (4) (5)
Short-Term Long-Term Short-Term Long-Term Other
(15%) (15%)
1. Separate category rate
group capital gain or (loss)

2. U.S. capital loss adjustment
amount

3. Subtotal (subtract line 2 from
line 1 gain amounts)

4. Net U.S. long-term capital
loss

5. U.S. long-term capital loss
adjustment

6. Excess net U.S. long-term
capital loss

7. Long-term capital gain (or
adjustment amount)

8. Limitation percentage

9. Long-term limitation amounts

10. Adjustment amounts

11. Rate differential adjustments

12. Long-term gains

13. Rate differential adjustment

14. Long-term gain

15. Adjusted separate category
capital gains and losses

Instructions for Form 1116 (2023) 13

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Instructions for Worksheet B

Line 1. For each separate category, combine the capital gains and losses as follows.
•  Combine your foreign source short-term capital gains and losses and enter the result in column (1) or (3). 
•  Combine your foreign source long-term capital gains and losses and enter the result in column (2) or (4).
Line 2. Complete the Line 2 Worksheet for each column on line 1 with a gain.
Line 4. Enter your net long-term capital loss (if any) from U.S. sources. To determine this amount, subtract your long-term 
capital losses from U.S. sources from your long-term capital gains from U.S. sources. Enter the loss (if any) as a positive 
amount in column (5). If you don't have a loss, leave line 4 blank and skip lines 5 through 14.
Line 5. Combine the amounts (if any) from columns (2) and (4) on line 2. Enter the result in column (5). If you don't have any 
amount entered in either column, enter -0- in column (5).
Line 6. Subtract line 5 from line 4. Enter the result in column (5). If the result is zero or less, leave line 6 blank and skip lines 7 
through 14 of this worksheet.
Line 7.
•  If you entered an amount in either column (2) or (4) (but not both) of line 3, subtract line 6 from the amount entered in either 
column (2) or (4) of line 3. Enter the result in column (2) or (4) on line 7 and skip lines 8 through 12.
•  If you entered amounts in both columns (2) and (4) on line 3, combine those amounts and enter the result in column (5) on 
line 7.
Line 8. Divide line 3, column (2), by line 7, column (5). Enter the result on line 8, column (2). Divide line 3, column (4), by 
line 7, column (5). Enter the result on line 8, column (4). Round off each result to at least four decimal places.
Line 9. Multiply each decimal amount on line 8 by line 6 and enter the results in the appropriate columns on line 9.
Line 10. Subtract line 9, column (2), from line 3, column (2), and enter the result on line 10, column (2). Subtract line 9, 
column (4), from line 3, column (4), and enter the result on line 10, column (4).
Line 11. Multiply each amount on line 10 by 0.4054 and enter the results here.
Line 12. Combine line 11, column (2), with line 9, column (2), and enter the result on line 12, column (2). Combine line 11, 
column (4), with line 9, column (4), and enter the result on line 12, column (4). Include the amounts on line 1a of the 
applicable Form 1116. Skip lines 13 and 14.
Line 13. Multiply the amount on line 7 by 0.4054 and enter the result here in the applicable column.
Line 14. Combine line 6 and line 13 and enter the result here. Include the result on line 1a of the applicable Form 1116.
Line 15.
If you have a:
•  Short-term gain shown in column (1) or (3) of line 3, enter the amount of that short-term gain on line 15, column (1) or (3).
•  Long-term gain shown in column (2) or (4) of line 3, and line 6 is blank, multiply the amount of each gain by 0.4054 and 
enter the result on line 15, column (2) or (4).
•  Short-term loss in any column of line 1, complete the Line 15 Worksheet for each column with a loss.
•  Long-term loss in column (2) or (4) of line 1, multiply the amount of the loss by 0.4054 and enter the result on line 15 in the 
appropriate column.
After you have completed line 15:
•  Include line 15 gain amounts on line 1a of the applicable Form 1116, and 
•  Include line 15 loss amounts on line 5 of the applicable Form 1116.

14                                                                                  Instructions for Form 1116 (2023)

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Line 2 Worksheet (For Line 2 of Worksheet B)
(See instructions below.)                                                                Keep for Your Records
                                                     Category #1                      Category #2

                          Specify ▶                                          

                                                     Short-Term   Long-Term  Short-Term  Long-Term

1. Separate category rate group 
    gain (or loss) . . . . . . . . . . . . . . . 1.                                      

2. Separate category gain (or loss)              2.                          

3. Foreign source capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              3.  

4. Capital gain net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.  

5. Total U.S. capital loss adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        5.  

6. Separate category 
   adjustment . . . . . . . . . . . . . . . . .  6.                          

7. Rate Group Factor . . . . . . . . . .         7.                                      

8. Rate Group Adjustment . . . . . .             8.                                      

                                                     Instructions for Line 2 Worksheet

Line 1. Enter your gains and losses from line 1 of Worksheet B. Enter a loss as a negative amount (in parentheses).

Line 2. For each separate category, combine the amounts from line 1. Enter a loss as a negative amount (in parentheses).
Line 3. Combine the amounts from line 2 of this worksheet. If the result is zero or less, stop here. Don't enter any amount on 
line 2 of Worksheet B.
Line 4. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form 
4952, line 4g. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B. 
Instead, complete Worksheet A.
Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that 
Schedule D. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B. 
Instead, complete Worksheet A.
Line 5. Subtract line 4 from line 3 and enter the result on line 5. If the result is zero or less, stop here. Don't enter any amount 
on line 2 of Worksheet B. 
Line 6.
• If only one separate category has a positive amount on line 2, enter the amount from line 5 on line 6 (in the column for the 
separate category with the positive amount on line 2).
• If both separate categories have positive amounts on line 2, divide each amount on line 2 by line 3. Multiply each result by 
line 5. Enter the results on line 6 in the appropriate columns.
Line 7.
For each separate category, the following rules apply.
• If you entered an amount on line 6 and you entered positive amounts in both the short-term and long-term columns on 
line 1, divide each positive amount on line 1 by line 2 and enter the results in the appropriate columns.
• Leave line 7 blank if you didn't enter an amount on line 6 or only one column on line 1 has a positive amount.
Line 8.
For each separate category, the following rules apply.
• If you entered amounts on line 7, multiply each amount on line 7 by line 6. Enter the results in the appropriate columns on 
line 8 of this worksheet and on line 2 of Worksheet B.
• If line 7 is blank, enter the amount from line 6 in the same column on line 8 as the column that has a gain on line 1. Also, 
enter the amount on line 2 of Worksheet B in the appropriate column. If line 6 is blank, don't enter any amount on line 8 of this 
worksheet or line 2 of Worksheet B.

Instructions for Form 1116 (2023)                                                                                                                                    15

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Line 15 Worksheet (For Line 15 of Worksheet B)                                                    Keep for Your Records
1. Enter your net short-term capital gain (if any) from U.S. sources. To determine this amount, subtract your 
    short-term capital losses from U.S. sources from your short-term capital gains from U.S. sources. If the result is 
    zero or a loss, enter -0-  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1.  

 2. If you entered a short-term gain on line 3 of Worksheet B, enter that amount here . . . . . . . . . . . . . . . . . . . . . . . . .                                             2.  

3. Add lines 1 and 2  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3.  

 4. Did you enter a short-term capital loss on line 1 of Worksheet B for one (but not both) of the separate 
    categories? 

            Yes.               Complete lines 5–10 and skip the rest of this worksheet.

            No.                Skip lines 5–10 and go to line 11.

5. Enter the short-term capital loss from line 1 of Worksheet B (enter the loss as a positive amount)       . . . . . . . .                                                         5.  
6. Enter the gain, if any, determined on line 3. If line 3 isn't a gain, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  6.  
7. Subtract line 6 from line 5. If zero or a loss, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      7.  
8. Multiply line 7 by 0.4054 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8.  
9. Enter the smaller of line 5 or line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              9.  
10. Add lines 8 and 9. Enter the result here and on line 15 of Worksheet B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                      10. 
11. Is the amount on line 1 zero?
            Yes.               Multiply each short-term loss by 0.4054. Enter the results on line 15 of Worksheet 
                               B. Skip the rest of this worksheet.
            No.                Go to line 12.
12. Enter your short-term loss from Worksheet B, line 1, column (1) (enter the loss as a positive 
    amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 
13. Enter your short-term loss from Worksheet B, line 1, column (3) (enter the loss as a positive 
    amount) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 
14. Add lines 12 and 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       14. 
15. Enter the gain determined in line 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               15. 
16. Subtract line 15 from line 14  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          16. 
    Is the result zero or less?
            Yes.               Skip the rest of this worksheet. Enter each short-term loss from line 1 on line 15 of 
                               Worksheet B, in the applicable column, without adjustment (that is, each short-term 
                               loss you enter on line 15 of Worksheet B will be the same as the short-term loss 
                               you entered on line 1 of Worksheet B).
            No.                Complete lines 17–22.
17. Multiply line 16 by 0.4054  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         17. 
18. Add lines 15 and 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       18. 
19. Divide line 12 by line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       19. 
20. Multiply line 19 by line 18. Enter the result here and on Worksheet B, line 15, column (1)  . . . . . . . . . . . . . . . . . .                                                 20. 
21. Divide line 13 by line 14  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        21. 
22. Multiply line 21 by line 18. Enter the result here and on Worksheet B, line 15, column (3) . . . . . . . . . . . . . . . . . . .                                                22. 

16                                                                                     Instructions for Form 1116 (2023)

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Lines 1a and 1b—Foreign Gross Income (Form 1040). Don't include deductions and losses related to
Include income in the category checked above Part I that is exempt or excluded income such as foreign earned income
taxable by the United States and is from sources within the you have excluded on Form 2555 on lines 2 through 5.
country entered on line i. You must include income even if it Special rules apply to the allocation of research and
isn't taxable by that foreign country. Identify the type of experimental expenditures. See Regulations section
income on the dotted line next to line 1a. Don't include any 1.861-17.
earned income excluded on Form 2555, Foreign Earned
Income. If the law of a U.S. state to which you pay income taxes
doesn't specifically exempt foreign source income from tax,
Example. If you received dividends (passive category
you may be required to make a special allocation of state
income) and wages (general category income) from foreign
taxes you paid. See Pub. 514 for more information.
sources, you must complete two Forms 1116. On one Form
1116, check box c (passive category income), enter the The deduction for state and local taxes on
dividends on line 1a, and enter “Dividends” on the dotted ! Schedule A (Form 1040), lines 5a through 5c, is
line. On the other Form 1116, check box d (general category CAUTION generally limited to $10,000 ($5,000 if married filing
income), enter on line 1a wages not excluded on Form 2555, separately). Don't include more than this amount of state and
and enter “Wages” on the dotted line. Complete Parts I, II, local taxes on Form 1116, lines 2 and 3a.
and III of each Form 1116. Then, complete Part IV on the
Form 1116 with the larger amount entered on line 24.
Line 2
If you are filing a Form 1116 that includes foreign
! source qualified dividends or foreign source capital Enter your deductions that definitely relate to the gross
CAUTION gains or losses, see Foreign Qualified Dividends and income from foreign sources shown on line 1a. For example,
Capital Gains (Losses), earlier. if you are reporting foreign business income on line 1a,
include on line 2 business expenses such as supplies and
advertising incurred as part of operating the foreign business.
Line 1b
Also include on line 2 state and local income taxes related to
foreign source income. For more information, see Pub. 514
You must check the box on line 1b if all of the following apply. and section 861 and the regulations under that section.
• The income on line 1a is compensation for services you Attach a statement listing the separate expenses included on
performed as an employee. line 2.
• Your total employee compensation from both U.S. and
foreign sources was $250,000 or more. Don't include any interest expense on line 2. See lines 4a
• You used an alternative basis (discussed in Pub. 514) to and 4b for special rules for interest expense.
determine the source of the compensation entered on
line 1a.
Lines 3a and 3b
In addition, attach to Form 1116 a statement that contains
the following information. Some deductions don't definitely relate to either your foreign
• Your name and social security number (written across the source income or your U.S. source income. Enter on lines 3a
top of the statement). and 3b any deductions (other than interest expense) that:
• The specific compensation income or the specific fringe • Aren't shown on line 2, and
benefit for which the alternative basis is used. • Aren't definitely related to your U.S. source income.
• For each such item, the alternative basis of allocation of Line 3a. Include the following itemized deductions (from
source used. Schedule A (Form 1040)) on line 3a.
• For each such item, a computation showing how the • Medical expenses (line 4).
alternative allocation was computed. • General sales taxes.
• A comparison of the dollar amount of the compensation • Real estate taxes for your home.
sourced within and without the United States under both the • State and local personal property taxes.
alternative basis and the time or geographical basis for If you don't itemize deductions, enter your standard
determining the source. deduction on line 3a.
You must keep documentation showing why the alternative Line 3b. Enter on line 3b any other deductions that don't
basis more properly determines the source of the definitely relate to any specific type of income (for example,
compensation. deductions shown on Schedule 1 (Form 1040), Part II,
Adjustments to Income).
Lines 2 Through 5—Deductions and Losses Attach a statement listing the separate expenses included
You must reduce your foreign gross income on line 1a by on lines 3a and 3b.
entering on lines 2 through 5:
• Any of your deductions that definitely relate to that foreign Lines 3d and 3e
income; and
• A ratable share of your other deductions that don't For lines 3d and 3e, gross income means the total of your
definitely relate to that foreign income, any other foreign gross receipts (reduced by cost of goods sold), total capital
income, or U.S. source income. and ordinary gains (before subtracting any losses), and all
If you don't itemize deductions, enter your standard other income (before subtracting any deductions).
deduction on line 3a, and don't enter on lines 2 through 5 any Line 3d. Enter your gross foreign source income from the
deductions that would have been reported on Schedule A category you checked above Part I of this Form 1116. Include

Instructions for Form 1116 (2023) 17

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any foreign earned income you have excluded on Form 2555          If you are a U.S. citizen, resident alien, or a domestic estate, 
but don't include any other exempt income.                        and your gross foreign source income (including any income 
If you had income from more than one country, you must            excluded on Form 2555) doesn't exceed $5,000, you can 
enter income from only one country in each column.                allocate all of your interest expense to U.S. source income. 
                                                                  Otherwise, each type of interest expense is apportioned 
If you had to adjust your foreign qualified dividends or          separately using an “asset method.” See Pub. 514 for more 
capital gains (discussed earlier), include those amounts          information.
without regard to any adjustments.
                                                                    Example.  You have investment interest expense of 
Line 3e. Enter on line 3e in each column your gross income        $2,000. Your assets of $100,000 consist of stock generating 
from all sources and all categories, both U.S. and foreign.       U.S. source income (adjusted basis, $40,000) and stock 
"Gross income from all sources" is a constant amount (that is,    generating foreign source income (adjusted basis, $60,000). 
you will enter the same amount on line 3e for each column of      You apportion 40% ($40,000/$100,000) of $2,000, or $800, 
all Forms 1116 that you file). Include any foreign earned         of your investment interest to U.S. source income and 60% 
income you have excluded on Form 2555 but don't include           ($60,000/$100,000) of $2,000, or $1,200, to foreign source 
any other exempt income.                                          income. In this example, you will enter the $1,200 
If you are a nonresident alien, include on both lines 3d and      apportioned to foreign source income on line 4b. You 
3e your income that isn't effectively connected with a trade or   wouldn't enter the $800 apportioned to U.S. source income 
business in the United States.                                    on any line of Part I of Form 1116.
If you had to adjust your foreign qualified dividends or 
capital gains (discussed earlier), include those amounts          Line 5
without regard to any adjustments.
                                                                  If you have capital losses from foreign sources, see Foreign 
Line 3f                                                           Qualified Dividends and Capital Gains (Losses), earlier, for 
                                                                  information on adjustments you may be required to make.
Divide line 3d by line 3e and round off the result to at least 
four decimal places (for example, if your result is 0.8756782,    Part II—Foreign Taxes Paid or 
round off to 0.8757, not to 0.876 or 0.88). Enter the result, but 
don't enter more than “1.”                                        Accrued
                                                                          See General Instructions, earlier, for descriptions of 
Line 4a                                                             !     foreign taxes that are eligible for the foreign tax credit 
                                                                  CAUTION and for foreign taxes that aren't eligible for the foreign 
If your gross foreign source income (including income             tax credit.
excluded on Form 2555) doesn't exceed $5,000, you can               Generally, you can take a foreign tax credit in the tax year 
allocate all of your interest expense to U.S. source income.      you paid or accrued the foreign taxes, depending on your 
Otherwise, deductible home mortgage interest including            method of accounting. If you report on the cash basis, you 
points is apportioned using a gross income method. Use the        can choose to take the credit for accrued taxes by checking 
Worksheet for Home Mortgage Interest to figure the amount         the “Accrued” box in Part II on a timely filed original return. 
to enter on line 4a.                                              You can’t make this choice on an amended return. Once you 
                                                                  choose to do this, you must credit foreign taxes in the year 
Line 4b                                                           they accrue on all future returns.
                                                                    Generally, you must enter in Part II the amount of foreign 
Other interest expense includes investment interest, interest     taxes, in both the foreign currency denomination(s) and as 
incurred in a trade or business, and passive activity interest.   converted into U.S. dollars, that relate to the category of 

Worksheet for Home Mortgage Interest—Line 4a                                           Keep for Your Records
Note. Before you complete this worksheet, read the instructions for line 4a, earlier.
1. Enter gross foreign source income* of the type shown on Form 1116. Don't enter income 
   excluded on Form 2555  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  1.   
2. Enter gross income from all sources. Don't enter income excluded on Form 2555  . . . . . . . .                                                               2.  
3. Divide line 1 by line 2 and enter the result as a decimal (rounded to at least four 
   places) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3.   
4. Enter deductible home mortgage interest (from line 8e of Schedule A (Form 1040)) . . . . . . .                                                              4.   
5. Multiply line 4 by line 3. Enter the result here and on the appropriate Form 1116, 
   line 4a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.   
* If you have to report income from more than one country on Form 1116, complete a separate worksheet for each country. 
Use only the income from that country on line 1 of the worksheet.

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income checked above Part I. Taxes are related to the section 951A category income, as carrybacks and carryovers
income if the income is included in the foreign tax base on aren’t allowed for this category of income.
which the tax is imposed. If the foreign tax you paid or File Form 1040-X or other amended return and a revised
accrued relates to more than one category of income, Form 1116 for the earlier tax year to which you are carrying
apportion the tax among the categories. The apportionment back excess foreign taxes.
is based on the ratio of net foreign taxable income in each
category to the total net income subject to the foreign tax. Special rules for carryforwards of pre-2018 unused for-
See Allocation of Foreign Taxes in Pub. 514 for an example. eign taxes. Unused foreign taxes in the pre-2018 separate
category for general income carried forward are generally
Enter in Part II the foreign taxes that were previously allocated to your post-2017 separate category for general
suspended under section 909 and that are allowed in 2023 income. Alternatively, you can allocate those foreign taxes to
because the related income is taken into account in 2023. the post-2017 separate category for foreign branch category
Enter “909 taxes” in column (l) instead of the date paid or income to the extent the unused foreign taxes would have
accrued. Complete the other columns as appropriate. been allocated to your post-2017 separate category for
If foreign tax paid on passive income is reported to foreign branch category income, and would have been
TIP you in U.S. dollars on a Form 1099-DIV, 1099-INT, or unused foreign taxes with respect to that separate category, if
similar statement, you don't have to convert the that separate category had applied in the year or years the
amount shown into foreign currency. This rule applies unused foreign taxes arose. A simplified safe harbor is also
whether or not you can make the election to claim the foreign available for determining the portion of the unused foreign
tax credit without filing Form 1116 (as explained earlier). taxes that may be allocated to the post-2017 separate
Enter “1099 taxes” in Part II, column (l), and complete category for foreign branch category income. See
columns (q) through (u) for each foreign country indicated in Regulations section 1.904-2(j)(1)(iii) for further details.
Part I. Restrictions. You can't carry a credit back to a tax year for
which you claimed a deduction, rather than a credit, for
Note. If you are taking a credit for additional taxes paid or foreign taxes paid or accrued. However, you must reduce the
accrued as the result of an audit by a foreign taxing authority amount of any carryback or carryforward by the amount that
or you are filing an amended return reflecting a foreign tax you would have used had you chosen to claim a credit rather
refund, attach a statement to Form 1116 identifying these than a deduction in that year.
taxes. If, for any year, you elected to claim the foreign tax credit
without filing Form 1116 (as explained earlier), the following
Part III—Figuring the Credit rules apply.
• You can't carry over unused foreign taxes paid or accrued
Line 10 in a year to which the election doesn't apply to or from any
Enter the unused foreign taxes in the separate category from year for which you made the election.
another tax year that are eligible to be carried forward to or • The carryback-carryforward period isn't extended if you
back to 2023. The amount of foreign taxes carried forward to are unable to use a carryback or carryforward because you
the current tax year is the amount from Schedule B (Form made the election.
1116), line 3, column (xiv). Attach Schedule B (Form 1116) to • Don't reduce the carryback or carryforward by the amount
your Form 1116 for each applicable separate category of you would have used in the election year if you hadn't made
income if you enter a carryover of foreign taxes from a prior the election.
tax year on Form 1116, line 10, or if you generated a foreign More information. See Pub. 514 for more information on
tax carryover in the current year. You don't need to file carryback and carryforward provisions, including examples.
Schedule B (Form 1116) for 2023 if you carry back a foreign
tax to 2023, and don't otherwise need to file Schedule B Line 12
(Form 1116). See the Instructions for Schedule B (Form You may have to reduce the foreign taxes you paid or
1116) for more information. accrued by the following items.
If you enter an amount on line 10 and you don't need • Taxes on income excluded on Form 2555. Reduce
TIP to attach Schedule B, check the box on line 10. taxes paid or accrued by the taxes allocable to any foreign
earned income excluded on Form 2555. If only part of your
foreign earned income is excluded, you must determine the
You can carry back 1 year and then forward 10 years any amount of tax allocable to excluded income. To do so,
foreign tax you paid or accrued to any foreign country or U.S. multiply the foreign taxes paid or accrued on foreign earned
possession (reduced as described under Line 12, later) on income received or accrued during the tax year by the
income in a separate category that is more than the following fraction.
limitation. First, apply the excess to the earliest year to which
it may be carried. Then, apply it to the next earliest year, and Numerator: Foreign earned income and housing amounts
so on. The carryback-carryforward period can't be extended you excluded for the tax year minus otherwise deductible
even if you are unable to take a credit in 1 of the intervening expenses (not including the foreign housing deduction)
years. allocable to that income.
Denominator: Your total foreign earned income received or
Special rules apply to the carryback and carryforward of accrued during the tax year minus deductible expenses
foreign taxes paid or accrued on foreign oil and gas income. (including the foreign housing deduction) allocable to that
See section 907(f). income. However, if the foreign jurisdiction charges tax on
No foreign tax carryovers are allowed for foreign taxes foreign earned income and some other income (for example,
paid or accrued on section 951A category income. Leave earned income from U.S. sources or a type of income not
line 10 of Form 1116 blank if you complete a Form 1116 for subject to U.S. tax) and the taxes on the other income can't

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be segregated, the denominator is the total amount of activities. If you can figure the taxes specifically attributable to
income subject to foreign tax minus deductible expenses boycott operations, enter the amount on line 12. If you can't
allocable to that income. figure the amount of taxes specifically attributable to boycott
• Taxes on income from Puerto Rico exempt from U.S. operations, multiply the credit otherwise allowable by the
tax. The reduction applies if you have income from Puerto international boycott factor (figured on Schedule A (Form
Rican sources that isn't taxable on your U.S. tax return. To 5713), International Boycott Factor) and enter the result on
figure the credit, reduce your foreign taxes paid or accrued by Form 1116, line 34. Attach a statement to Form 1116
the taxes allocable to the exempt income. See Pub. 570 for showing in detail how you figured the reduction.
more information. For more information, see Form 5713 and its instructions.
• Taxes on income from American Samoa excluded on
Form 4563. If you are a bona fide resident of American • Taxes related to a foreign tax credit splitting event.
Samoa, reduce taxes paid or accrued by any taxes Reduce taxes paid or accrued by any taxes paid or accrued
attributable to income from sources in American Samoa with respect to a foreign tax credit splitting event. If there is a
excluded on Form 4563. For more information, see Pub. 570. foreign tax credit splitting event, you may not take the foreign
• Taxes on combined foreign oil and gas income. tax into account before the tax year in which you take the
Reduce taxes paid or accrued by a portion of taxes imposed income into account. There is a foreign tax credit splitting
on combined foreign oil and gas income. The amount of the event with respect to a foreign income tax if the related
reduction is the amount by which your foreign oil and gas income is (or will be) taken into account by a covered person.
taxes exceed the amount of your combined foreign oil and A covered person is either of the following.
gas income for the year multiplied by a fraction equal to your
pre-credit U.S. tax liability divided by your worldwide taxable 1. An entity in which you hold, directly or indirectly, at
income. You may be entitled to carry over to other years taxes least a 10% ownership interest (determined by vote or value).
reduced under this rule. See section 907(f). 2. Any person who is related to you. For a list of related
Combined foreign oil and gas income is the sum of foreign persons, see Nondeductible Loss in chapter 2 of Pub. 544.
oil-related income and foreign oil and gas extraction income. A covered asset acquisition under section 901(m) isn't a
Foreign oil and gas taxes are the sum of foreign oil and gas foreign tax credit splitting event under section 909.
extraction taxes and foreign oil-related taxes.
• Taxes on foreign mineral income. Reduce taxes paid or For more information, see section 909 and the regulations
accrued on mineral income from a foreign country or U.S. under that section.
possession if you took a deduction for percentage depletion
under section 613 for any part of the mineral income. Line 13
• Reduction for failure to file Form 5471. U.S. You must adjust the foreign taxes paid or accrued if they
shareholders who control a foreign corporation must file Form relate to passive income that is treated as other category
5471, Information Return of U.S. Persons With Respect To income because it is high taxed. On your Form 1116 for
Certain Foreign Corporations. If you don't file Form 5471 and passive category income, enter as a negative number (in
furnish all of the information required by the due date of your parentheses) the amount of your foreign taxes that relate to
tax return, reduce by 10% all foreign taxes that you may that income. On your Form 1116 for the other category
otherwise take into account for the foreign tax credit. You may income, enter as a positive number the amount of foreign
have to make additional reductions if the failure continues. taxes that relate to that income.
See section 6038(c) and Regulations section 1.6038-2(k) for
details and exceptions. Line 15
The amount on line 15 is your taxable income (or loss),
Note. The reduction in foreign taxes is reduced by any dollar before adjustments, from sources outside the United States.
penalty imposed under section 6038(b). If the amount on line 15 is zero or a loss, you generally have
no foreign tax credit for the category of income checked
• Reduction for failure to file Form 8865. U.S. partners above Part I of this Form 1116. However, you must complete
who control a foreign partnership must file Form 8865, Return line 16 and continue with the form even if line 15 is zero or a
of U.S. Persons With Respect to Certain Foreign loss.
Partnerships. If you don't file Form 8865 and furnish all of the
information required by the due date of your tax return, Line 16
reduce by 10% all foreign taxes that you may otherwise take
You are required to increase or decrease the amount on
into account for the foreign tax credit. You may have to make
line 15 by the following adjustments. The adjustments must
additional reductions if the failure continues. See section
be made in the order listed. If you have more than one
6038(c) and Regulations section 1.6038-3(k) for details and
adjustment, enter the net adjustment on line 16 and attach a
exceptions.
detailed statement showing your computation. See Pub. 514
Note. The reduction in foreign taxes is reduced by any dollar for more details on these adjustments.
penalty imposed under section 6038(b). The adjustments are as follows.
• Reduction of taxes or credit due to international 1. Adjustment for disallowed business loss under sec-
boycott operations. In general, if you agree to participate in, tion 461(l). Increase the amount on line 15 by the amount of
or cooperate with, an international boycott, you must file any business loss that is disallowed under section 461(l) to
Form 5713, International Boycott Report, and attach all the extent it is attributable to the separate category of income
supporting schedules. In addition, you must reduce either the of the applicable Form 1116. For purposes of adjustments 2–
total taxes available for credit or the credit otherwise 6 described below, any reference to an amount on line 15
allowable by your foreign taxes resulting from boycott shall mean the amount on line 15 after taking into account
this adjustment for disallowed business loss.

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2. Allocation of foreign losses. If you have a loss on 3. Allocation of U.S. losses. If you have a net loss from
line 15 of one Form 1116 and you have income on line 15 of U.S. sources, proportionately allocate that loss among the
one or more other Forms 1116, you must reduce the foreign separate categories of your foreign income. Reduce the
income by a pro rata share of the loss before you use any income on line 15 (adjusted by any allocation of losses, as
remaining loss to reduce U.S. source income. described earlier under 2. Allocation of foreign losses) by
If the loss reduces foreign source income, you must including (in parentheses) on line 16 the allocable portion of
create, or increase the balance in, a separate limitation loss any U.S. loss. In later years, you will be allowed to treat part
account and you must recharacterize the income you receive of your U.S. source income as foreign source income.
in the loss category in later years. See 5. Recapture of A U.S. loss includes a rental loss on property located in
separate limitation loss accounts, later. In situations where the United States. If you have any qualified dividends or
the loss to be allocated exceeds foreign income in other capital gains (including capital gain distributions) or losses for
categories: the tax year and you are required to make any adjustments to
• The excess reduces U.S. source income (as modified those amounts, as explained under Foreign Qualified
under Capital losses next); Dividends and Capital Gains (Losses), earlier, or in the
• You must create, or increase the balance in, an overall instructions for line 18, the amount of your U.S. loss is the
foreign loss account; and excess of:
• For later years, you must follow the rules described under a. The total of the amounts entered on line 15 for each
4. Recapture of prior year overall foreign loss accounts, later. Form 1116 you are filing, over
If the loss in one category reduces foreign source income b. The amount entered on line 18 of the Form 1116.
in another category and that second category has a separate
limitation loss account with respect to the first category, then You allocate the net loss to a separate category of income
the two offsetting separate limitation loss account balances by multiplying the net loss by a fraction. The numerator of the
are netted for purposes of determining the amount of income fraction is the foreign source income in a separate category,
in either category that is subject to recharacterization under and the denominator is the total foreign source income in all
5. Recapture of separate limitation loss accounts, later. separate categories.
Capital losses. In determining your U.S. source income, 4. Recapture of prior year overall foreign loss accounts.
reduce the amount of any capital losses from U.S. sources by If you had an overall foreign loss in a prior year that offset
the amount you entered on line 4 of Worksheet A or line 5 of U.S. source income, a part of your foreign income (in the
the Line 2 Worksheet for Worksheet B. If you have capital same category as the loss) is recharacterized as U.S. source
losses from U.S. sources and you didn't use either Worksheet income in each following tax year.
A or Worksheet B, see Pub. 514 to determine your U.S. The part of your total foreign income subject to
source income. recharacterization is the lesser of the following.
Example. For 2023, you completed three Forms 1116. a. The total amount of maximum potential recapture in all
The first had a loss from general category income of $2,000 overall foreign loss accounts. The maximum potential
on line 15, the second had passive category income of recapture in any account for a category is the lesser of:
$4,000 on line 15, and the third had income of $1,000 from i. The current year taxable income from foreign sources in
the certain income re-sourced by treaty category on line 15. that category (the amount from line 15, less any adjustment
You must allocate the $2,000 loss between the passive for allocation of losses, as described earlier under 2.
category income and the certain income re-sourced by treaty Allocation of foreign losses and 3. Allocation of U.S. losses
category in the same proportion as each category's income for that category); or
bears to the total foreign income.
ii. The balance in the overall foreign loss account for that
The amount of the loss that would reduce passive category.
category income would be 80% ($4,000/$5,000) of the
$2,000 loss, or $1,600. Include the $1,600 (in parentheses) b. 50% (or more, if you choose) of your total taxable
on line 16 of the passive category income Form 1116. income from foreign sources.
Assuming you have no other line 16 adjustments, enter If the total foreign income subject to recharacterization is
$2,400 ($4,000 − $1,600) on line 17 of that form. the amount described in (a), earlier, then for each separate
The amount of the loss that would reduce the certain category the recapture amount is the maximum potential
income re-sourced by treaty would be 20% ($1,000/$5,000) recapture amount for that category. If the total foreign income
of the $2,000 loss, or $400. Include the $400 (in subject to recharacterization is the amount described in (b)
parentheses) on line 16 of the certain income re-sourced by above, then for each separate category the recapture amount
treaty Form 1116. Assuming you have no other line 16 is computed by multiplying the total recapture amount by the
adjustments, enter $600 ($1,000 − $400) on line 17 of that following fraction:
form.
In this case, all of the $2,000 loss was allocated between Maximum potential recapture amount for the overall foreign loss
account in the separate category
the foreign source passive category income and the certain
income re-sourced by treaty category, and no reduction was Total amount of maximum potential recapture in all overall
made to U.S. source income. foreign loss accounts
If you receive general category income in a later year, you
must recharacterize all or part of that income as passive
Reduce the amount on line 15 by including (in
category income and certain income re-sourced by treaty in
parentheses) on line 16 the amount of the recapture for the
that later year. See the example under 5. Recapture of
category checked above Part I, as determined above. Be
separate limitation loss accounts, later.
sure to attach your computation. If you elect to recapture

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more of an overall foreign loss than is required ((b) above), income must be recharacterized as passive category income.
show in your computation the percentage of taxable income Similarly, $400 of the general category income must be
recharacterized and the dollar amount recharacterized. recharacterized as certain income re-sourced by treaty. On
Attach a statement to Form 1116 showing the balance in your 2024 Form 1116 for passive category income, you
each separate category overall foreign loss account. See would include $1,600 on line 16. On your 2024 Form 1116 for
Regulations section 1.904(f)-1(b) for more information. certain income re-sourced by treaty, you would include $400
Dispositions of certain property. If you generated on line 16. On your 2024 Form 1116 for general category
foreign source gain in the same category as the overall income, you would include ($2,000) on line 16.
foreign loss on a disposition of property that was used Recharacterizing income from a separate category
predominantly in a foreign trade or business and that TIP doesn't result in recharacterizing any tax.
generated foreign source income in the same category as the
overall foreign loss, then the gain on the disposition may be
subject to recharacterization as U.S. source income to the 6. Recapture of overall domestic loss accounts. If you
extent of 100% of your foreign source taxable income. This is have an overall domestic loss for any tax year beginning after
true whether or not you would otherwise recognize gain on 2006, you must create, or increase the balance in, an overall
the disposition. See section 904(f)(3). domestic loss account and you must recharacterize a portion
of your U.S. source taxable income as foreign source taxable
The above rule also generally applies to a gain on the income in succeeding years for purposes of the foreign tax
disposition of stock in a CFC, if you owned more than 50% credit.
(by vote or value) of the stock right before you disposed of it.
See section 904(f)(3)(D) for more information and The part that is treated as foreign source taxable income
exceptions. for the tax year is the smaller of:
• The total balance in your overall domestic loss account in
Reduce line 15 by including (in parentheses) on line 16 each separate category (less amounts recaptured in earlier
the smallest of: years), or
a. The amount of the gain not recaptured above; • 50% of your U.S. source taxable income for the tax year.
b. The remaining amount of the overall foreign loss not Under the Tax Cuts and Jobs Act, section 904(g)(5)
recaptured in earlier years or in the current year; or ! allows for an election to recapture up to 100% of any
c. The amount from line 15 (less any adjustment for CAUTION pre-2018 unused overall domestic loss from a prior
allocation of losses, as described earlier under 2. Allocation year, as opposed to the 50% stated in the previous
of foreign losses and 3. Allocation of U.S. losses, and any paragraph. This election is applicable for any tax year
adjustment for any recapture above). beginning after December 31, 2017, and before January 1,
See Pub. 514 if you disposed of property described above 2028.
and you recognized foreign source gain in a different You must establish and maintain separate overall
category than the overall foreign loss, you recognized U.S. domestic loss accounts for each separate category in which
source gain, or you didn't recognize gain. foreign source income is offset by the domestic loss. The
5. Recapture of separate limitation loss accounts. If, in a balance in each overall domestic loss account is the amount
prior tax year, you reduced your foreign taxable income in the of the overall domestic loss subject to recapture. The
category checked above Part I by a pro rata share of a loss recharacterized income is allocated among and increases
from another category, you must recharacterize in 2023 all or foreign source income in separate categories in proportion to
part of any income you receive in 2023 in that loss category. the balances of the overall domestic loss accounts for those
If you have separate limitation loss accounts in the loss separate categories. You increase the amount on line 15 (as
category relating to more than one other category and the adjusted by any of the other adjustments previously
total balances in those loss accounts exceed the income you mentioned in these line 16 instructions) of the Form 1116 for
receive in 2023 in the loss category, then income in the loss each of the separate categories to which the recharacterized
category is recharacterized as income in those other income is allocated.
categories in proportion to the balances of the separate Overall domestic loss defined. In a tax year in which
limitation loss accounts for those other categories. You you choose to claim the foreign tax credit, the overall
recharacterize the income by: domestic loss is the domestic loss for that tax year to the
• Increasing the amount on line 15 (adjusted by any of the extent that it offsets foreign source taxable income for that tax
other adjustments previously mentioned in these line 16 year or for any preceding tax year (in which you choose to
instructions) of the Form 1116 for each of the separate claim the foreign tax credit) because of a carryback. If you
categories, other than the loss category, previously reduced don't choose to claim the foreign tax credit for a tax year, the
by including on line 16 any recharacterized income; and overall domestic loss is the domestic loss for that tax year to
• Decreasing the amount on line 15 (adjusted by any of the the extent that it offsets foreign source taxable income for any
other adjustments previously mentioned in these line 16 preceding tax year (in which you chose to claim the foreign
instructions) of the Form 1116 for the loss category by tax credit) because of a carryback.
including on line 16 the amount of recharacterized income as Domestic loss. A domestic loss is the amount by which
a negative number (in parentheses). the U.S. source gross income for the tax year is exceeded by
Example. Using the facts in the Example under the sum of the expenses, losses, and other deductions
2. Allocation of foreign losses, earlier, in the next year (2024), properly allocated or apportioned to that income. Determine
you have $5,000 of general category income, $3,000 of this amount by taking into account any net operating loss
passive category income, and $500 of certain income carried forward from a prior tax year (but not any loss carried
re-sourced by treaty. Because $1,600 of the general category back). If you have any capital gains or losses, take them into
income loss was used to reduce your passive category account after any adjustments required under Foreign
income in 2023, $1,600 of your 2024 general category Qualified Dividends and Capital Gains (Losses), earlier.

22 Instructions for Form 1116 (2023)

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Worksheet for Line 18 (Worldwide Qualified Dividends and Capital 
Gains)                                                                                                                 Keep for Your Records

CAUTION! See the instructions for line 18 before starting this worksheet.

1. Individuals: Enter the amount from Form 1040, 1040-SR, or 1040-NR, line 15. 
    Estates and trusts: Enter taxable income without the deduction for your exemption  . . . . . . .                                                 1.    
2.  Enter your worldwide 28% gains. See instructions  . . . . . . . . . . . . . .                                 2.   
3.  Multiply line 2 by 0.2432 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           3.   
4.  Enter your worldwide 25% gains. See instructions  . . . . . . . . . . . . . .                                 4.   
5.  Multiply line 4 by 0.3243  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          5.   
6.  Enter your worldwide 20% gains and qualified dividends. See 
    instructions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.   
7.  Multiply line 6 by 0.4595  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          7.   
8.  Enter your worldwide 15% gains and qualified dividends. See 
    instructions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.   
9.  Multiply line 8 by 0.5946 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           9.   
10. Enter your worldwide 0% gains and qualified dividends. See 
    instructions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.  
11. Add lines 3, 5, 7, 9, and 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.  
12. Subtract line 11 from line 1. Enter the result here and on Form 1116, line 18  . . . . . . . . . . . . . . .                                     12.  

Line 18                                                         If you aren't required to complete the Worksheet for 
If you have qualified dividends or capital gains, you may be    Line 18 or you qualify for the adjustment exception and elect 
required to make adjustments to those qualified dividends       not to adjust your qualified dividends and capital gains, enter 
and gains before you take those amounts into account on         on line 18 of Form 1116 your taxable income from Form 
line 18.                                                        1040, 1040-SR, or 1040-NR, line 15.
                                                                You qualify for the adjustment exception if you meet both 
Individuals Who Completed a Qualified Dividends                 of the following requirements.
and Capital Gain Tax Worksheet                                  1. Line 5 of the Qualified Dividends and Capital Gain Tax 
                                                                Worksheet doesn't exceed:
If you completed the Qualified Dividends and Capital Gain       a. $364,200 if married filing jointly or qualifying surviving 
Tax Worksheet in the Instructions for Form 1040, you must       spouse,
use the Worksheet for Line 18 to figure the amount to enter     b. $182,100 if married filing separately,
on line 18 if:
                                                                c. $182,100 if single, or
1. Line 5 of your Qualified Dividends and Capital Gain 
Tax Worksheet is greater than zero, and                         d. $182,100 if head of household.
2. Line 23 of your Qualified Dividends and Capital Gain         2. The amount of your foreign source net capital gain, 
Tax Worksheet is less than line 24 of that worksheet.           plus the amount of your foreign source qualified dividends, is 
                                                                less than $20,000.
Adjustment exception.    If you qualify for the adjustment      If you are subject to the alternative minimum tax, see the 
exception, you can elect not to adjust your qualified dividends special rules in Regulations section 1.904(b)-1(b)(3).
and capital gains. You make this election by not completing 
the Worksheet for Line 18. You must make this election if you                                                     Your foreign source net capital gain is the excess of 
have any foreign qualified dividends or foreign capital gains   TIP                                               your foreign source net long-term capital gain over 
(or losses) and you chose not to make any adjustments to                                                          your foreign source net short-term capital loss.
those amounts when you completed lines 1a and 5. You can't 
make this election if you have any foreign qualified dividends  Completing the Worksheet for Line 18.                                                      If you do need to 
or foreign capital gains (or losses) and you made               complete the Worksheet for Line 18, do the following.
adjustments to those amounts when you completed lines 1a        Lines 2 through 5.                                     Skip these lines.
and 5. In this case, complete the Worksheet for Line 18.        Line 6.                                           Enter the amount from line 20 of the Qualified 
                                                                Dividends and Capital Gain Tax Worksheet.

Instructions for Form 1116 (2023)                                                                                                                                     23

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Line 8. Enter the amount from line 17 of the Qualified Form 1040, 1040-SR, or 1040-NR filers. You must use the
Dividends and Capital Gain Tax Worksheet. Worksheet for Line 18 to figure the amount of tax to enter on
Line 10. Enter the amount from line 9 of the Qualified line 18 of Form 1116 if:
Dividends and Capital Gain Tax Worksheet. • Line 18 of the Schedule D Tax Worksheet is greater than
zero, and
Complete all other lines as instructed on the worksheet. • Line 45 of the Schedule D Tax Worksheet is less than
line 46.
Estates and Trusts That Completed a Qualified Form 1041 filers. You must use the Worksheet for Line 18
Dividends Tax Worksheet or Schedule D to figure the amount of tax to enter on line 18 of Form 1116 if:
• Line 17a of the Schedule D Tax Worksheet is greater than
If you completed the Qualified Dividends Tax Worksheet in zero, and
the Instructions for Form 1041 or you completed Part V of • Line 42 of the Schedule D Tax Worksheet is less than
Schedule D (Form 1041), you must use the Worksheet for line 43.
Line 18 to figure the amount to enter on line 18 if:
Adjustment exception. If you qualify for the adjustment
1. You figured your tax using the Qualified Dividends Tax exception, you can elect not to adjust your qualified dividends
Worksheet, line 5 of that worksheet is greater than zero, and and capital gains. You make this election by not completing
line 21 of that worksheet is less than line 22; or the Worksheet for Line 18. You must make this election if you
2. You figured your tax using Part V of Schedule D (Form have any foreign qualified dividends or foreign capital gains
1041), line 27 of Schedule D is greater than zero, and line 43 (or losses) and you chose not to make any adjustments to
of Schedule D is less than line 44. those amounts when you completed lines 1a and 5. You can't
make this election if you have any foreign qualified dividends
Adjustment exception. If you qualify for the adjustment or foreign capital gains (or losses) and you made
exception, you can elect not to adjust your qualified dividends adjustments to those amounts when you completed lines 1a
and capital gains. You make this election by not completing and 5. In this case, complete the Worksheet for Line 18.
the Worksheet for Line 18. You must make this election if you You qualify for the adjustment exception if:
have any foreign qualified dividends or foreign capital gains
(or losses) and you chose not to make any adjustments to 1. The amount of your foreign source qualified dividends,
those amounts when you completed lines 1a and 5. You can't plus the amount of your foreign source net capital gain, is
make this election if you have any foreign qualified dividends less than $20,000; and
or foreign capital gains (or losses) and you made 2. Line 18 of the Schedule D Tax Worksheet in the
adjustments to those amounts when you completed lines 1a Schedule D (Form 1040) instructions is less than or equal to:
and 5. In this case, complete the Worksheet for Line 18. See a. $364,200 if married filing jointly or qualifying surviving
section 904(b) and the regulations issued under that Code spouse,
section to determine if you qualify for the adjustment
b. $182,100 if married filing separately,
exception.
c. $182,100 if single, or
Your foreign source net capital gain is the excess of
TIP your foreign source net long-term capital gain over d. $182,100 if head of household.
your foreign source net short-term capital loss. (Or, for trusts and estates, see section 904(b) and the
regulations issued under that Code section to determine if
If you aren't required to complete the Worksheet for you qualify for the adjustment exception.)
Line 18 or you qualify for the adjustment exception and elect
not to adjust your qualified dividends and capital gains, enter If you are subject to the alternative minimum tax, see the
on line 18 of Form 1116 the estate's or trust's taxable income special rules in Regulations section 1.904(b)-1(b)(3).
without the deduction for its exemption. Your foreign source net capital gain is the excess of
Completing the Worksheet for Line 18. If you do need to TIP your foreign source net long-term capital gain over
complete the Worksheet for Line 18, do the following. your foreign source net short-term capital loss. Ignore
Lines 2 through 5. Skip these lines. any foreign source qualified dividends or capital gains that
you elected to include on Form 4952, line 4g, in determining
Line 6. Enter the amount from line 18 of the Qualified
the amount of your foreign source qualified dividends and net
Dividends Tax Worksheet or line 40 of Schedule D.
capital gain.
Line 8. Enter the amount from line 14 of the Qualified
Dividends Tax Worksheet or line 36 of Schedule D. If you aren't required to complete the Worksheet for
Line 10. Enter the amount from line 8 of the Qualified Line 18 or you qualify for the adjustment exception and elect
Dividends Tax Worksheet or line 30 of Schedule D. not to adjust your qualified dividends and capital gains, enter
on line 18 of Form 1116 your taxable income without the
Complete all other lines as instructed on the worksheet. deduction for your exemption (for example, the amount from
Form 1040, 1040-SR, or 1040-NR, line 15).
Taxpayers Who Completed the Schedule D Tax If you do need to complete the Worksheet for Line 18, do
Worksheet the following.
Line 2. Enter the amount (if any) from line 42 of the
If you figured your tax using the Schedule D Tax Worksheet Schedule D Tax Worksheet in the Schedule D (Form 1040)
(in the Schedule D (Form 1040) instructions or in the instructions or line 39 of the Schedule D Tax Worksheet in the
Schedule D (Form 1041) instructions), you may have to use Schedule D (Form 1041) instructions.
the Worksheet for Line 18 to figure the amount of tax to enter Line 4. Enter the amount (if any) from line 39 of the
on line 18 of Form 1116. Schedule D Tax Worksheet in the Schedule D (Form 1040)

24 Instructions for Form 1116 (2023)

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instructions or line 36 of the Schedule D Tax Worksheet in the tax with respect to that distribution, you may be eligible for an
Schedule D (Form 1041) instructions. increase in your foreign tax credit limitation under section
Line 6. Enter the amount (if any) from line 33 of the 960(c). Report on line 22 any such increase in limitation. See
Schedule D Tax Worksheet in the Schedule D (Form 1040) section 960(c) and Regulations section 1.960-4 for more
instructions or line 30 of the Schedule D Tax Worksheet in the details to determine if you are available for an increase in
Schedule D (Form 1041) instructions. limitation.
Line 8. Enter the amount (if any) from line 30 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040) Line 24
instructions or line 26 of the Schedule D Tax Worksheet in the The maximum foreign tax credit you can claim in the current
Schedule D (Form 1041) instructions. year is generally limited to the allocated amount of U.S. tax
Line 10. Enter the amount (if any) from line 22 of the imposed on the foreign income, or the actual amount of
Schedule D Tax Worksheet in the Schedule D (Form 1040) foreign tax paid or accrued on the foreign income (after
instructions or line 19 of the Schedule D Tax Worksheet in the reductions required on line 12), whichever is less. However,
Schedule D (Form 1041) instructions. see Foreign Taxes Eligible for a Credit, earlier, for additional
information.
Complete all other lines as instructed on the worksheet.
If the amount on line 23 is smaller than the amount on
Line 20 line 14, see Pub. 514 for more information on carryback and
carryforward provisions, including examples.
If you are completing line 20 for separate category g
(lump-sum distributions), enter the amount from line 5 of the
Worksheet for Lump-Sum Distributions. Part IV—Summary of Credits From
Don't complete line 20 for separate category (section e Separate Parts III
901(j) income), discussed earlier. Complete lines 25 through 31 in Part IV only if you must
For all other applicable categories, complete line 20 as complete more than one Form 1116 because you have more
follows. than one of the categories of income listed above Part I.
Individuals. Enter the total of Form 1040, 1040-SR, or Complete Part IV on only one Form 1116 (the one with the
1040-NR, line 16, and Schedule 2 (Form 1040), Part I, line 2, largest amount entered on line 24) to summarize the credits
less any tax included on line 16 from Form 4972. you figured on all of your Forms 1116. However, see
Exception below. Enter the credits from line 24 of all of your
Estates and trusts. Forms 1116 on lines 25 through 31 of the Form 1116 you are
• Form 1041 filers. Enter the amount from Form 1041, using to summarize your credits. File the other Forms 1116
Schedule G, line 1a. as attachments.
• Form 990-T filers. Enter the total of Form 990-T, Part II,
lines 2, 3, 4, and 6. However, don't include any taxes listed in Exception. If you completed a Form 1116 for category g
section 26(b) that are included in Part II, line 4. For example, (lump-sum distributions) or (section 901(j) income), e don't
don't include the base erosion minimum tax under section use Part IV of that Form 1116 as your summary, unless you
59A, and the tax and interest on a nonqualified withdrawal are filing both a Form 1116 for category and a Form 1116 g
from a capital construction fund (section 7518). for category but no other category.e
• Form 1040-NR filers. Enter the amount from Form
1040-NR, line 16, less any tax included on line 16 of Form Line 33
1040-NR from Form 4972. Enter the smaller of line 20 or line 32.
You may need to adjust the amount you report on Form Note. Generally, line 32 will exceed line 20 only if you have
1116, line 20, by the amounts reported on Form 8978, U.S. capital gains or qualified dividends that are subject to
line 14. If you file Form 8978, Partner’s Additional Reporting the capital gain rate differential (figured in the Worksheet for
Year Tax, you will need to increase or decrease the amount Line 18).
you report on Form 1116, line 20, by the amount of any
positive or negative tax from Form 8978, line 14, that you Schedule B (Form 1116) and Schedule C (Form
report on your tax return and that isn’t already included on the 1116)
lines specified earlier. For example, for Form 1040, a positive
Form 8978 adjustment is already included in the tax reported See the separate instructions for Schedule B (Form 1116)
on Form 1040, line 16, while a negative tax adjustment is not. and Schedule C (Form 1116) to see if you must file these
If after your adjustment, the amount of your tax is zero or less, schedules.
enter -0- on Form 1116, line 20. If any additional guidance is
provided related to reporting amounts from Form 8978 on Paperwork Reduction Act Notice. We ask for the
Form 1116, we will post it at IRS.gov/Form1116 under Recent information on this form to carry out the Internal Revenue
Developments. laws of the United States. You are required to give us the
information. We need it to ensure that you are complying with
Line 22 these laws and to allow us to figure and collect the right
amount of tax.
If you have included in gross income an amount of income of
a controlled foreign corporation (CFC) in prior years under You aren't required to provide the information requested
section 951(a), you may have established an excess on a form that is subject to the Paperwork Reduction Act
limitation account under section 960(c). If that is the case and unless the form displays a valid OMB control number. Books
you receive a distribution of previously taxed earnings of the or records relating to a form or its instructions must be
CFC in the current year that are excluded from your gross retained as long as their contents may become material in the
income under section 959(a) and you paid or accrued foreign administration of any Internal Revenue law. Generally, tax

Instructions for Form 1116 (2023) 25

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returns and return information are confidential, as required by about the law or the form, 1 hr., 1 min.; Preparing the 
section 6103.                                                   form, 1 hr., 42 min.; Copying, assembling, and sending 
                                                                the form to the IRS, 34 min.
The time needed to complete and file this form will vary 
depending on individual circumstances. The estimated            If you have comments concerning the accuracy of these 
burden for individual taxpayers filing this form is approved    time estimates or suggestions for making this form simpler, 
under OMB control number 1545-0074 and is included in the       we would be happy to hear from you. You can write to the IRS 
estimates shown in the instructions for their individual income at the address listed in the instructions of the tax return with 
tax return. The estimated burden for all other taxpayers who    which this form is filed.
file this form is Recordkeeping, 2 hr., 43 min.; Learning 

26                                                                                       Instructions for Form 1116 (2023)

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