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                                                                                                        Department of the Treasury
                                                                                                        Internal Revenue Service
2022

Instructions for Form 1116

Foreign Tax Credit
(Individual, Estate, or Trust)

Section references are to the Internal Revenue Code unless                  Form 7204, Consent To Extend the Time To Assess Tax 
otherwise noted.                                                            Related to Contested Foreign Income Taxes—Provi-
Contents                                                             Page   sional Foreign Tax Credit Agreement.  New Form 7204 
General Instructions  . . . . . . . . . . . . . . . . . . . . . . . . .  2  has been developed pursuant to Regulations section 
                                                                            1.905-1(d)(4) to allow taxpayers, under the conditions 
Election To Claim the Foreign Tax Credit 
                                                                            provided in Regulations sections 1.905-1(c)(3) and 
    Without Filing Form 1116           . . . . . . . . . . . . . . . .   2  1.905-1(d)(4), to elect to claim a provisional foreign tax credit 
Purpose of Form . . . . . . . . . . . . . . . . . . . . . . . . .        2  for a contested foreign income tax liability (or a portion of it) 
Credit or Deduction      . . . . . . . . . . . . . . . . . . . . . . .   2  that the taxpayer has remitted to the foreign country, before 
Foreign Taxes Eligible for a Credit            . . . . . . . . . . . .   3  the contest has been resolved. See Form 7204 and its 
Foreign Taxes Not Eligible for a Credit              . . . . . . . . .   3  instructions for details.
Foreign Currency Conversion              . . . . . . . . . . . . . . .   3  Final foreign tax credit regulations. Final foreign tax 
Foreign Tax Redeterminations . . . . . . . . . . . . . . .               4  credit regulations were published January 4, 2022. The new 
                                                                            regulations made changes to the rules relating to the 
Income From Sources Outside the United                                      creditability of foreign taxes under Internal Revenue Code 
    States   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5  section 901 and 903, the applicable period for claiming a 
Categories of Income         . . . . . . . . . . . . . . . . . . . . .   6  credit or deduction for foreign taxes, and the new election to 
Special Rules . . . . . . . . . . . . . . . . . . . . . . . . . . .      7  claim a provisional credit for contested foreign taxes. For 
Foreign Qualified Dividends and Capital                                     more information, see Treasury Decision 9959, 2022-03 
    Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . .       9  I.R.B. 328, available at IRS.gov/irb/2022-03_IRB#TD-9959.
Specific Instructions . . . . . . . . . . . . . . . . . . . . . . . .    11
Part I—Taxable Income or Loss From                                          Reminders
    Sources Outside the United States              . . . . . . . . .     11 Alternative minimum tax. In addition to your regular income 
Part II—Foreign Taxes Paid or Accrued                  . . . . . . .     19 tax, you may be liable for the alternative minimum tax. A 
Part III—Figuring the Credit . . . . . . . . . . . . . . . .             19 foreign tax credit may be allowed in figuring this tax. See the 
Part IV—Summary of Credits From Separate                                    Instructions for Form 6251, Alternative Minimum 
    Parts III . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25 Tax —Individuals, or the Instructions for Schedule I (Form 
                                                                            1041), Alternative Minimum Tax —Estates and Trusts, for a 
                                                                            discussion of the alternative minimum tax foreign tax credit.
Future Developments
For the latest information about developments related to                    More Information
Form 1116 and its instructions, such as legislation enacted 
after they were published, go to IRS.gov/Form1116.                          For more information about, or assistance with, figuring the 
                                                                            foreign tax credit, the following IRS resources are available.
What’s New                                                                  Publications. See Pub. 514, Foreign Tax Credit for 
Schedule K-3. Beginning in 2021, certain information that                   Individuals. The following publications may also be helpful.
was previously reported on Schedule K-1 (Form 1065),                        • Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens 
Schedule K-1 (Form 1120-S), and Schedule K-1 (Form 8865)                    Abroad.
is now reported on Schedule K-3 (Form 1065), Schedule K-3                   • Pub. 519, U.S. Tax Guide for Aliens.
(Form 1120-S), and Schedule K-3 (Form 8865), respectively.                  • Pub. 570, Tax Guide for Individuals With Income From 
See Reporting Foreign Tax Information From Partnerships                     U.S. Possessions.
and S Corporations, later. In 2022, certain partnerships and                        If you are overseas, call 267-941-1000 (not toll free).
S corporations are excepted from providing Schedule K-3 to 
partners and shareholders that might otherwise benefit from 
Schedule K-3 information in claiming a foreign tax credit. 
However, you have the right to request the Schedule K-3                             Write to: Internal Revenue Service, International 
from the partnership or S corporation to obtain this                                Accounts, Philadelphia, PA 19255-0725
information. See the partnership and S corporation 
instructions for Forms 1065 and 1120-S, Schedules K-2 and 
K-3 and the partner and shareholder instructions for Forms 
1065 and 1120-S, Schedule K-3 available at IRS.gov/
Form1065 and IRS.gov/Form1120S, respectively, for further 
information.

Dec 28, 2022                                                         Cat. No. 11441F

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income from U.S. sources only because you are a citizen or a
General Instructions resident of that country or U.S. possession, don't use that tax
in figuring the amount of your credit.
Election To Claim the Foreign Tax See section 906 for more information on the foreign tax
Credit Without Filing Form 1116 credit allowed to a nonresident alien individual.

You may be able to claim the foreign tax credit without filing Separate Schedules and Forms
Form 1116. By making this election, the foreign tax credit
limitation (lines 15 through 23 of the form) won't apply to you. • Use Schedule B (Form 1116) to reconcile your prior year
This election is available only if you meet all of the following foreign tax carryover with your current year foreign tax
conditions. carryover. See Schedule B (Form 1116) and its instructions,
and the instructions for line 10, later, for more information.
• All of your foreign source gross income was “passive • Use Schedule C (Form 1116) to report foreign tax
category income” (which includes most interest and redeterminations that occurred in the current tax year and
dividends). See c. Passive Category Income, later. However, that relate to prior tax years. See Schedule C (Form 1116)
for this purpose, passive income also includes (a) income and its instructions, and Foreign Tax Redeterminations, later,
subject to the special rule for high-taxed income described for more information.
later, and (b) certain export financing interest. • Use Form 7204 to consent to extend the time to assess tax
• All the income and any foreign taxes paid on it were related to contested foreign income taxes, if you are electing
reported to you on a qualified payee statement. Qualified to claim a provisional foreign tax credit for the contested
payee statements include Form 1099-DIV, Form 1099-INT, foreign income taxes.
Schedule K-1 (Form 1041), Schedule K-3 (Form 1065),
Schedule K-3 (Form 1120-S), or similar substitute Credit or Deduction
statements. Instead of claiming a credit for eligible foreign taxes, you can
• Your total creditable foreign taxes aren't more than $300 choose to deduct foreign income taxes. Form 1040 or
($600 if married filing a joint return). 1040-SR filers choosing to do so would deduct foreign
This election isn't available to estates or trusts. income taxes on Schedule A (Form 1040), Itemized
Deductions. Generally, if you take the credit for any eligible
If you make this election, the following rules apply. foreign taxes, you can't take any part of that year's foreign
• You can't carry over to or from any other year any foreign taxes as a deduction. However, even if you take the credit for
taxes paid or accrued in a tax year to which the election eligible foreign taxes for the year, you can take a deduction
applies (but carryovers to and from other years are for the following.
unaffected). See the instructions for line 10, later. • Foreign taxes not allowed as a credit because of boycott
• You are still required to take into account the general rules provisions.
for determining whether a tax is creditable. See Foreign • Taxes paid to certain foreign countries for which a credit
Taxes Eligible for a Credit and Foreign Taxes Not Eligible for has been denied, as described in item 4 under Foreign Taxes
a Credit, later. Not Eligible for a Credit, later.
• You are still required to reduce the taxes available for • Taxes on income or gain that aren't creditable because
credit by any amount you would have entered on line 12 of you don't meet the holding period requirement, as described
Form 1116. See the instructions for line 12, later. in item 5 or 7 under Foreign Taxes Not Eligible for a Credit,
To make the election, just enter on the foreign tax credit later.
line of your tax return (for example, Schedule 3 (Form 1040), • Taxes on income or gain that aren't creditable because
Part I, line 1) the smaller of (a) your total foreign tax, or (b) you have to make related payments, as described in item 6
your regular tax. See the instructions for line 20, later, for how or 8 under Foreign Taxes Not Eligible for a Credit, later.
to figure your regular tax. • Certain taxes paid or accrued to a foreign country in
connection with the purchase or sale of oil or gas extracted in
Purpose of Form that country, as described in item 10 under Foreign Taxes
Not Eligible for a Credit, later.
Who should file. File Form 1116 to claim the foreign tax Taxes on income or gain that aren't creditable because
•
credit if the election, earlier, doesn't apply and: they were paid or accrued in connection with a covered asset
• You are an individual, estate, or trust; and acquisition, as described in item 12 under Foreign Taxes Not
• You paid or accrued certain foreign taxes to a foreign Eligible for a Credit, later.
country or U.S. possession. If you are an accrual basis taxpayer or if you elected to
•
See Foreign Taxes Eligible for a Credit, later, to determine claim your foreign tax credit on an accrual basis, taxes paid
if the taxes you paid or accrued qualify for the credit. that relate to a prior tax year in which you elected to claim a
Don't use Form 1116 to figure a credit for taxes paid to the deduction instead of a credit in that prior year. See
U.S. Virgin Islands. Instead, use Form 8689, Allocation of Regulations section 1.901-1(c)(3).
Individual Income Tax to the U.S. Virgin Islands.
You may make an election to claim a credit or to change
Nonresident aliens. If you are a nonresident alien, you from claiming a deduction to claiming a credit at any time
generally can't take the credit. However, you may be able to before the end of a special 10-year limitation period
take the credit if: described in section 6511(d)(3) (or section 6511(c) if the
• You were a resident of Puerto Rico during your entire tax period is extended by agreement). You may make an
year, or election to claim a deduction or to change from claiming a
• You pay or accrue tax to a foreign country or U.S. credit to claiming a deduction at any time before the end of
possession on income from foreign sources that is effectively the standard 3-year limitation period described in section
connected with a trade or business in the United States. But 6511(a) (or section 6511(c) if the period is extended by
if you must pay tax to a foreign country or U.S. possession on

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

Instructions for Form 1116 (2022) -3-

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

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

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Categories of Income Specified passive category income. Dividends from a
Use a separate Form 1116 to figure the credit for each domestic international sales corporation (DISC) or former
category of foreign source income listed above Part I of Form DISC to the extent they are treated as foreign source income,
1116. The following instructions tell you what kind of income and certain distributions from a former foreign sales
to include in each category. For more information, see Pub. corporation (FSC) are specified passive category income.
514, section 904, and Regulations sections 1.904-4 and
d. General Category Income
1.904-5.
General category income is income that isn't section 951A
a. Section 951A Category Income category income, foreign branch category income, passive
Section 951A category income includes any amount included category income, or income described in categories e, f, and
in gross income under section 951A (other than passive g, discussed later. General category income may include the
category income). Section 951A category income is following.
otherwise referred to as global intangible low-taxed income • Wages, salary, and overseas allowances of an individual
(GILTI) and is included by U.S. shareholders of certain as an employee.
CFCs. See Pub. 514 for additional details. • Income earned in the active conduct of a trade or
business.
b. Foreign Branch Category Income • Gains from the sale of inventory or depreciable property
used in a trade or business. See Pub. 514 for additional
Foreign branch category income consists of the business details.
profits of U.S. persons that are attributable to one or more
qualified business units (QBUs) in one or more foreign e. Section 901(j) Income
countries. Foreign branch category income doesn’t include
any passive category income. See Pub. 514 for further No credit is allowed for foreign taxes imposed by and paid or
information. accrued to certain sanctioned countries. However, income
derived from each sanctioned country is subject to a
c. Passive Category Income separate foreign tax credit limitation. Therefore, you must use
a separate Form 1116 for income derived from each
Passive category income consists of passive income and sanctioned country. Because no credit is allowed for taxes
specified passive category income. paid to sanctioned countries, you would generally complete
Passive category income doesn't include gain from the Form 1116 for this category only through line 17.
sale of inventory or property held primarily for sale to
customers in the ordinary course of your trade or business; Note. A foreign tax credit may be claimed for foreign taxes
gain from commodities hedging transactions; and active paid or accrued with respect to section 901(j) income if such
business gains or losses of producers, processors, tax is paid or accrued to a country other than a sanctioned
merchants, or handlers of commodities. It may also not country. For example, if a U.S. citizen resident in a
include dividends, interest, rents, or royalties received from a non-sanctioned country pays a residence-based income tax
CFC in which you are a U.S. shareholder who owns 10% or in that country on income derived from business activities in
more of the total voting power or the total value of all classes a sanctioned country, those foreign taxes would be eligible
of the corporation's stock. for a foreign tax credit. In this situation, you would continue
completing Form 1116, and not stop at line 17.
Passive income. Passive income generally includes
dividends, interest, royalties, rents, annuities, excess of gains Sanctioned countries are those designated by the
over losses from the sale of property that produces such Secretary of State as countries that repeatedly provide
income or of non-income-producing investment property, and support for acts of international terrorism, countries with
excess of gains over losses from foreign currency or which the United States doesn't have or doesn't conduct
commodities transactions. Capital gains not related to the diplomatic relations, or countries whose governments aren't
active conduct of a trade or business are also generally recognized by the United States and aren't otherwise eligible
passive income. to purchase defense articles or services under the Arms
Passive income doesn't include export financing interest, Export Control Act. Pub. 514 contains a list of these
active business rents and royalties, or high-taxed income. countries.
High-taxed income is income if the foreign taxes you paid on If you paid taxes to a country that ceased to be a
the income (after allocation of expenses) exceed the highest sanctioned country during the tax year, see Pub. 514 for
U.S. tax that can be imposed on the income. details on how to figure the foreign tax credit for the period
Passive income also doesn't include financial services that begins after the end of the sanctions.
income derived by a financial services entity. You are a Presidential waiver. The President of the United States has
financial services entity if you are predominantly engaged in the authority to waive the denial of the credit with respect to a
the active conduct of a banking, insurance, financing, or sanctioned country if:
similar business for the tax year. Financial services income of • The waiver is in the national interest of the United States
a financial services entity generally includes income derived and will expand trade and investment opportunities for U.S.
in the active conduct of a banking, financing, insurance, or companies in the sanctioned country; and
similar business. If you qualify as a financial services entity • The President reports to Congress, not less than 30 days
because you treat certain items of income as active financing before the waiver is granted, the intention to grant the waiver
income under Regulations section 1.904-4(e)(2)(i)(Y), you and the reason for the waiver.
must show the type and amount of each item on an
attachment to Form 1116.

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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, write 
   “LSD” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.  

f. Certain Income Re-Sourced by Treaty                             Special Rules
If a sourcing rule in an applicable income tax treaty treats 
U.S. source income as foreign source, and you elect to apply       Look-Through Rules
the treaty, the income will be treated as foreign source.          Certain income received or accrued by you as a 
                                                                   10%-or-more U.S. shareholder in a CFC is treated as income 
Important:  You must compute a separate foreign tax credit 
                                                                   in one of the separate categories listed under Categories of 
limitation for any income for which you claim benefits under a 
                                                                   Income, earlier. For example, subpart F inclusions, 
treaty, using a separate Form 1116 for each amount of 
                                                                   dividends, interest, rents, and royalties from a CFC are only 
re-sourced income from a treaty country. This rule doesn’t 
                                                                   treated as passive category income to the extent they are 
apply to income that is re-sourced by reason of the relief from 
                                                                   attributable to passive category income of the CFC. See 
double taxation rules in any U.S. income tax treaty that is 
                                                                   Regulations section 1.904-5 for more information.
solely applicable to U.S. citizens who are residents of the 
foreign treaty country. See sections 865(h), 904(d)(6), and        Reporting Foreign Tax Information From 
904(h)(10) and the regulations under those sections 
(including 1.904-4(k)) for any grouping rules and other            Partnerships and S Corporations
exceptions. Add the amounts from line 24 of each separate          If you received a Schedule K-3 from a partnership or S 
Form 1116 and enter the total on line 30 of your summary           corporation that includes foreign tax information, use the 
Form 1116 (that is, the Form 1116 for which you are                rules below to report that information on Form 1116.
completing Part IV). In addition, you may be required to file      Note. In 2022, the partnership or S corporation may be 
Form 8833, Treaty-Based Return Position Disclosure Under           excepted from providing Schedule K-3 to you if the 
Section 6114 or 7701(b), for the re-sourced income.                partnership or S corporation has limited foreign activity. You 
                                                                   still have the right to request Schedule K-3 and it may provide 
g. Lump-Sum Distributions                                          information that can increase your foreign tax credit. See the 
You can take a foreign tax credit for taxes you paid or            partnership and S corporation instructions for Form 1065 and 
accrued on a foreign source lump-sum distribution from a           Form 1120-S, Schedules K-2 and K-3 and the partner and 
pension plan. Special formulas may be used to figure a             shareholder instructions for Forms 1065 and 1120-S, 
separate tax on a qualified lump-sum distribution for the year     Schedule K-3, available at IRS.gov/Form1065 and IRS.gov/
in which the distribution is received. See Pub. 575 for more       Form1120S, respectively, for further information.
information.
If you are able to elect, and do elect, to figure your U.S. tax    General Information for Partners and S 
on a lump-sum distribution using Form 4972, Tax on                 Corporation Shareholders
Lump-Sum Distributions, a separate foreign tax credit 
limitation applies. Use a separate Form 1116. On this              Less-than-10% limited partners.          If you are a limited 
separate Form 1116, check box g above Part I. Skip Part I.         partner and you own a less-than-10% interest (by value) in 
Complete Part II showing only foreign taxes that are               the partnership, you must generally categorize your 
attributable to the lump-sum distribution. Then, complete the      distributive share of foreign source income and deductions 
Worksheet for Lump-Sum Distributions to figure the amounts         from that partnership as passive income. See the Partner’s 
to enter in Part III.                                              Instructions for Schedule K-3 (Form 1065) and Regulations 
                                                                   section 1.904-4(n) for more details and exceptions.

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Reporting amounts on Form 1116. Include amounts Note. To help you with these rules, the partnership or S
reported to you on Schedule K-3 with any other amounts corporation has specifically identified the following on an
reportable on Form 1116 using: attachment to Form 1065, 1120-S, or 8865. See
• A separate Form 1116 for each category of income, and Schedule K-3, Part I, box 1.
• A separate column in Part I and a separate line in Part II for • Gains on the sale of eligible personal property for which a
each country or possession. foreign tax of 10% or more was paid or accrued.
• Losses on the sale of eligible personal property for which a
Note. For any item that isn't reported by country on foreign tax of 10% or more would have been paid had the
Schedule K-3, you may use any reasonable method to sale resulted in a gain.
allocate it between countries or possessions on Form 1116.
Include foreign source income in Part I of the applicable
Form 1116 (that is, the Form 1116 for the applicable category
Explanation of Certain Line Items on Schedule K-3 of income). Don't include in Part I of Form 1116 income that
for Forms 1065, 1120-S, and 8865 you determined (using these rules) to be U.S. source income.
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, If the partnership or S corporation has specifically
Section 1, columns (b) through (e)—Foreign gross in- ! identified any capital gains or losses or unrecaptured
come sourced at partnership or S corporation level. CAUTION section 1250 gain on Schedule K-3, Part II, Section
Income reported in these columns has already been sourced 1, line 8, or lines 11 through 15, and you have determined
for you by the partnership or S corporation. The partnership that those gains or losses are foreign source, see Foreign
or S corporation has reported this income to you by country Qualified Dividends and Capital Gains (Losses), later, before
and by category of income. Include these amounts in Part I of entering an amount in Part I of Form 1116. See the partner
each of the applicable Forms 1116 (that is, a separate Form and shareholder instructions for Forms 1065 and 1120-S,
1116 for each category of income you received). See the Schedule K-3, for further information.
partner and shareholder instructions for Forms 1065 and
1120-S, Schedule K-3, for further information. Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Section 1, line 24, column (g)—Total gross income.
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, Combine your distributive share of “Total gross income” from
Section 1, column (f)—Gross income sourced by part- Schedule K-3 with all of your other gross income and enter
ner or shareholder. This column includes income from the the total on line 3e. Note that you must include the total for all
sale of eligible personal property (most personal property countries in each column of line 3e. “Gross income from all
other than inventory, depreciable property, and certain sources” is a constant amount (that is, you will enter the
intangible property). See Pub. 514 for details. You must first same amount on line 3e for each column of all Forms 1116
determine (using the rules described next) whether the that you file).
income in this column is U.S. source income or foreign
source income. Then, only enter the foreign source income in Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
Part I of each of the applicable Forms 1116 (that is, a Section 2, lines 25 through 38, and 44 through 50, col-
separate Form 1116 for each category of income you umns (b) through (e)—Deductions allocated and appor-
received). tioned at partnership or S corporation level to foreign
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 on this column of Schedule K-3. If you are a U.S.
and has reported them to you by category of income. Include
resident (as defined next), the income is U.S. source income.
these amounts on line 2 of each of the applicable Forms
If you are a nonresident (as defined later), the income is
1116 (that is, a separate Form 1116 for each category of
foreign source income. See the partner and shareholder
income you received). See the partner and shareholder
instructions for Forms 1065 and 1120-S, Schedule K-3, for
instructions for Forms 1065 and 1120-S, Schedule K-3, for
further information.
further information.
U.S. resident. A U.S. resident is a U.S. citizen or resident
alien who doesn't have a tax home in a foreign country or a Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
nonresident alien who has a tax home in the United States. Section 2, lines 25 through 38, and 44 through 50, col-
Tax home. Generally, your tax home is the general area umn (f)—Other expenses. These lines in column (f)
of your main place of business, employment, or post of duty, include expenses (other than interest expense) of the
regardless of where you maintain your family home. Your tax partnership or S corporation that must be allocated and
home is the place where you are permanently or indefinitely apportioned at the partner or shareholder level (for example,
engaged to work as an employee or self-employed individual. research and experimental (R&E) expenses on line 32).
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 Forms 1065, 1120-S, and 8865, Schedule K-3, Part III,
U.S. resident. U.S. citizens and resident aliens with a foreign Section 1, reports information you will need to allocate and
tax home won't be treated as nonresidents for a sale of apportion R&E expense. Forms 1065 and 8865,
eligible personal property unless a foreign tax of 10% or more Schedule K-3, Part III, Section 3, reports information you will
was paid or accrued on the gain on the sale (or, in the case need to allocate and apportion the foreign-derived intangible
of a loss sale, a foreign tax of 10% or more would have been income deduction to foreign source income in separate
paid 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.

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Expenses that you allocate to U.S. source income shouldn't Note. See the partner and shareholder instructions for
be entered on any line of Part I of Form 1116. See the partner Forms 1065 and 1120-S, Schedule K-3, Parts I, II, and III, for
and shareholder instructions for Forms 1065 and 1120-S, information related to foreign oil and gas taxes, high-taxed
Schedule K-3, for further information. income, partner loan transactions, foreign tax
redeterminations, and other information that may be
Forms 1065, 1120-S, and 8865, Schedule K-3, Part II,
necessary to complete Form 1116.
Section 2, lines 39 through 43—Interest expense. See
the instructions for line 4b, later, to allocate and apportion the Foreign Qualified Dividends and
interest expense shown on these lines of Schedule K-3. In
applying those instructions, take into account your Capital Gains (Losses)
distributive share of the partnership's or S corporation's gross
income (for purposes of the $5,000 threshold) or your pro Qualified dividends are the amounts you entered on
rata share of the partnership's or S corporation's assets. See TIP Form 1040, 1040-SR, or 1040-NR, line 3a.
Forms 1065, 1120-S, and 8865, Schedule K-3, Part III,
Section 2, for the share of the partnership's or S corporation's If you have foreign source qualified dividends or foreign
assets. However, if you were a limited partner and your source capital gains (including any foreign source capital
interest in the partnership was less than 10%, see the next gain distributions) or losses, you may be required to make
paragraph. Include interest expense that you allocate to certain adjustments to those amounts before taking them into
foreign source income on line 4b of the applicable Form account on line 1a (gross income) or line 5 (losses).
1116. Don't enter in Part I of Form 1116 any interest expense If you completed the Qualified Dividends and Capital Gain
that you allocate to U.S. source income. Tax Worksheet in the Instructions for Form 1040, and aren't
Less-than-10% limited partners. If you are a limited required to file Schedule D, see Qualified Dividends and
partner and you own (directly or indirectly) a less-than-10% Capital Gain Tax Worksheet (Individuals) next to determine
interest (by income) in the partnership, you may generally the adjustments you may be required to make. If you
allocate your distributive share of interest expense from that completed the Qualified Dividends Tax Worksheet in the
partnership to foreign or U.S. source income based on your Instructions for Form 1041, see Qualified Dividends Tax
distributive share of the gross foreign or U.S. source income Worksheet (Estates and Trusts), later, to determine the
of that partnership. The interest expense you allocate to adjustments you may be required to make. If you are
foreign source income may generally be apportioned required to file Schedule D, see Schedule D Filers, later, to
exclusively to passive category income. However, see determine the adjustments you may be required to make.
Temporary Regulations section 1.861-9T(e)(4) for
exceptions. See the Partner’s Instructions for Schedule K-3 You can elect not to make the adjustments to your
(Form 1065) for further information. qualified dividends and capital gains if you qualify for the
adjustment exception. See Adjustment exception under
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
each category of income you received). See the partner and If you completed the Qualified Dividends and Capital Gain
shareholder instructions for Forms 1065 and 1120-S, Tax Worksheet in the Instructions for Form 1040 and you
Schedule K-3, for further information. don't have to file Schedule D, you may have to adjust the
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
3, line 2—Reduction of taxes. The partnership or S You must adjust the amount of your foreign source
corporation has already apportioned the reduction in taxes qualified dividends and capital gain distributions if both of the
available for credit and has reported it to you by category of following apply.
income. Include these amounts on line 12 of each of the • Line 5 of the Qualified Dividends and Capital Gain Tax
applicable Forms 1116 (that is, a separate Form 1116 for Worksheet is greater than zero.
each category of income you received). See the partner and • Line 23 of the Qualified Dividends and Capital Gain Tax
shareholder instructions for Forms 1065 and 1120-S, Worksheet is less than line 24 of that worksheet.
Schedule K-3, for further information. Adjustment exception. If you qualify for the adjustment
Forms 1065 and 8865, Schedule K-3, Part III, Section 4, exception, you can elect not to adjust your foreign source
line 3; and Form 1120-S, Schedule K-3, Part III, Section capital gain distributions and qualified dividends. You make
3, line 3— Foreign tax redeterminations. The this election by not adjusting these items. If you make this
partnership or S corporation has already apportioned the election, you must elect not to adjust any of your foreign
change in foreign income tax liability and has reported it to source qualified dividends or capital gain distributions.
you by country and by category of income. Include these You qualify for the adjustment exception if you meet both
amounts on each of the applicable Schedules C (Form 1116) of the following requirements.
(that is, a separate Schedule C (Form 1116) for each 1. Line 5 of the Qualified Dividends and Capital Gain Tax
category of income you received). See the partner and Worksheet doesn't exceed:
shareholder instructions for Forms 1065 and 1120-S,
Schedule K-3, for further information. a. $340,100 if married filing jointly or qualifying surviving
spouse,
b. $170,050 if married filing separately,

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c. $170,050 if single, or Schedule D Filers
d. $170,050 if head of household. Note. Throughout these instructions, references to
2. The amount of your foreign source capital gain Schedule D (Form 1041) are for estates and trusts only.
distributions, plus the amount of your foreign source qualified Adjustments to foreign qualified dividends. If you are
dividends, is less than $20,000. required to file Schedule D (Form 1040), you must adjust the
If you are subject to the alternative minimum tax, see the amount of your foreign source qualified dividends that you
special rules in Regulations section 1.904(b)-1(b)(3). include on line 1a of Form 1116 if one of the following applies
to you.
How to make adjustments. To adjust your foreign source
qualified dividends or capital gain distributions, multiply your 1. You figured your tax using the Qualified Dividends and
foreign source qualified dividends or capital gain distributions Capital Gain Tax Worksheet in the Form 1040 instructions,
in each separate category by 0.4054 if the foreign source line 5 of that worksheet is greater than zero, and line 23 of
qualified dividends or capital gain distributions are taxed at a that worksheet is less than line 24.
rate of 15%, and by 0.5405 if they are taxed at a 20% rate. 2. You figured your tax using Schedule D (Form 1041),
Include the results on line 1a of the applicable Form 1116. line 27 of Schedule D is greater than zero, and line 43 of
You adjust your foreign source qualified dividends or Schedule D is less than line 44.
capital gain distributions taxed at the 0% rate by not 3. You figured your tax using the Schedule D Tax
including them on line 1a. Worksheet (in the Schedule D (Form 1040) instructions),
line 18 of the Schedule D Tax Worksheet is greater than
No adjustments required. If you aren't required to adjust zero, and line 45 of the Schedule D Tax Worksheet is less
the amount of your foreign source qualified dividends or than line 46.
capital gain distributions, or you qualify for the adjustment
exception and elect not to adjust these items, include the 4. You figured your tax using the Schedule D Tax
amount of your foreign source qualified dividends and capital Worksheet (in the Schedule D (Form 1041) instructions),
gain distributions in each separate category (without line 17a of the Schedule D Tax Worksheet is greater than
adjustment) on line 1a of the applicable Form 1116. zero, and line 42 of the Schedule D Tax Worksheet is less
than line 43.
Qualified Dividends Tax Worksheet (Estates and Adjustment exception. If you qualify for the adjustment
Trusts) exception, you can elect not to adjust your foreign source
If you completed the Qualified Dividends Tax Worksheet in qualified dividends. You make this election by not adjusting
the Instructions for Form 1041, you must adjust the amount of these dividends or your foreign capital gains (or losses). If
your foreign source qualified dividends if: you make this election, you must elect not to adjust any of
• Line 5 of the Qualified Dividends Tax Worksheet is greater your foreign source qualified dividends.
than zero, and You qualify for the adjustment exception if you meet both
• Line 21 of the Qualified Dividends Tax Worksheet is less of the following requirements.
than line 22 of that worksheet. 1. Line 5 of the Qualified Dividends and Capital Gain Tax
Adjustment exception. If you qualify for the adjustment Worksheet in the Form 1040 instructions or line 18 of the
exception, you can elect not to adjust your foreign source Schedule D Tax Worksheet in the Schedule D (Form 1040)
qualified dividends. You make this election by not adjusting instructions is less than or equal to:
these dividends. If you make this election, you must elect not a. $340,100 if married filing jointly or qualifying surviving
to adjust any of your foreign source qualified dividends. spouse,
See section 904(b) and the regulations issued under that
b. $170,050 if married filing separately,
Code section to determine if you qualify for the adjustment
exception. c. $170,050 if single, or
How to make adjustment. To adjust your foreign source d. $170,050 if head of household.
qualified dividends, multiply your foreign source qualified 2. The amount of your foreign source net capital gain,
dividends in each separate category by 0.4054 if the foreign plus the amount of your foreign source qualified dividends, is
source qualified dividends are taxed at a rate of 15%, and by less than $20,000.
0.5405 if they are taxed at a 20% rate. Include the results on For trusts and estates, see section 904(b) and the
line 1a. regulations issued under that Code section to determine if
You adjust your foreign source qualified dividends taxed you qualify for the adjustment exception.
at the 0% rate by not including them on line 1a. If you are subject to the alternative minimum tax, see the
Don't adjust the amount of any foreign source special rules in Regulations section 1.904(b)-1(b)(3).
! qualified dividends that you elected to include on Note. Your foreign source net capital gain is the excess of
CAUTION Form 4952, line 4g. your net long-term capital gain from foreign sources over
your net short-term capital loss from foreign sources. Ignore
No adjustment required. If you aren't required to make any long-term capital gains you elected to include on Form
adjustments to your foreign source qualified dividends (or 4952, line 4g, in determining your foreign source net capital
you qualify for the adjustment exception and you elected not gain. Ignore any qualified dividends you elected to include on
to adjust these dividends), include your foreign source Form 4952, line 4g, in determining the amount of your foreign
qualified dividends on line 1a of the applicable Form 1116 source qualified dividends.
without adjustment. How to make adjustment. To adjust your foreign source
qualified dividends, multiply your foreign source qualified
dividends in each separate category by 0.4054 if the foreign

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source qualified dividends are taxed at a rate of 15%, and by Worksheet B. If you don't qualify to use Worksheet A ,
0.5405 if they are taxed at a 20% rate. Include the results on use Worksheet B to determine the adjustments you must
line 1a of the applicable Form 1116. make to your foreign source capital gains or losses if:
You adjust your foreign source qualified dividends taxed • You have foreign source capital gains or losses in no more
at the 0% rate by not including them on line 1a. than two separate categories,
• You didn't complete the Unrecaptured Section 1250 Gain
Don't adjust the amount of any foreign source Worksheet or the 28% Rate Gain Worksheet in the
! qualified dividends that you elected to include on Schedule D instructions, and
CAUTION Form 4952, line 4g.
• You don't have any capital gains taxed at a rate of 0% or
No adjustment required. If you aren't required to adjust 20%.
your foreign source qualified dividends (or you qualify for the Complete Worksheet B only once, even if you have capital
adjustment exception and elect not to adjust these gains or losses in two separate categories. Keep the
dividends), include on line 1a of Form 1116 the full amount of completed Worksheet B for your records. Don't file
foreign source qualified dividends without adjustment. Worksheet B with your tax return.
Adjustments to foreign capital gains and losses. You Capital losses are deductible only up to $3,000 ($1,500 if
must use Worksheet A Worksheet B, , or the instructions married filing separately) of ordinary income.
under Capital Gains and Losses in Pub. 514 to determine the
adjustments you must make to your foreign capital gains or
losses. Read the instructions that follow to see if you qualify Specific Instructions
to use Worksheet A or Worksheet B. If you don't qualify to
use Worksheet A or Worksheet B, use the instructions under Part I—Taxable Income or Loss From
Capital Gains and Losses in Pub. 514 to determine the
adjustments you must make. Sources Outside the United States
Before you complete Worksheet A or Worksheet B, Part I must be completed by all filers unless
specifically indicated otherwise in these instructions.
! you must reduce each foreign source long-term CAUTION!
CAUTION capital gain by the amount of that gain you elected to
include on Form 4952, line 4g. The gain you elected to
include on Form 4952, line 4g, must be entered directly on Line i—Foreign Country or U.S. Possession
line 1a of the applicable Form 1116 without adjustment. Generally, if you received income from, or paid taxes to,
more than one foreign country or U.S. possession, report
Worksheet A. You can use Worksheet A to determine the
information on a country-by-country basis on Form 1116,
adjustments you must make to your foreign source capital
Parts I and II. Use a separate column in Part I and a separate
gains or losses if you have foreign source capital gains or
line in Part II for each country or possession. If you paid taxes
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
under Adjustments to foreign qualified dividends under Foreign tax credit splitting event. If you had a foreign tax
Schedule D Filers and you didn't make any adjustments to credit splitting event in a previous year and you are taking the
your foreign qualified dividends (if any). related income into account in 2022, enter “909 income” on
• Line 15 or 16 of Schedule D (Form 1040) (line 18a or 19 of line i for that income instead of the country or possession
Schedule D (Form 1041)) is zero or a loss. name.
• 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
that worksheet is zero, or (c) line 23 of that worksheet is partly from foreign source) on a per-country basis. Total all
equal to or greater than line 24. section 863(b) foreign source income in the applicable
• You figured your tax using Schedule D (Form 1041) and category and enter the total in a single column in Part I. Enter
(a) line 27 of Schedule D is zero; (b) line 22 of Schedule D “863(b)” on line i. Total all section 863(b) deductions in the
minus the amount on Form 4952, line 4e, that you elected to applicable category and in the same column enter the totals
include on Form 4952, line 4g, is zero or less; or (c) line 43 is in lines 2 through 6. Total all foreign taxes imposed on
equal to or greater than line 44. section 863(b) income and enter the total on a single line in
• You figured your tax using the Schedule D Tax Worksheet Part II for the applicable category.
(in the Schedule D (Form 1040) instructions) and (a) line 18
is zero, (b) line 9 is zero or less, or (c) line 45 is equal to or Regulated investment company (RIC) pass-through
greater than line 46. amounts. You don't need to report income passed through
• You figured your tax using the Schedule D Tax Worksheet from a mutual fund or other regulated investment RIC on a
(in the Schedule D (Form 1041) instructions) and (a) line 17a country-by-country basis. Total all income, in the applicable
is zero, (b) line 9 is zero or less, or (c) line 42 is equal to or category, passed through from the mutual fund or other RIC
greater than line 43. and enter the total in a single column in Part I. Enter “RIC” on
Complete Worksheet A only once, even if you have capital line i. Total all foreign taxes passed through and enter the
gains or losses in two separate categories. Keep the total on a single line in Part II for the applicable category.
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
Capital losses are deductible only up to $3,000 ($1,500 if Forms 8992, U.S. Shareholder Calculation of Global
married filing separately) of ordinary income. Intangible Low-Taxed Income, you don't need to report those

Instructions for Form 1116 (2022) -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.

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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 (2022)              -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.
• Include line 15 loss amounts on line 5 of the applicable Form 1116.

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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.

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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. 

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inclusions on a country-by-country basis. Enter the total • You used an alternative basis (discussed in Pub. 514) to
inclusion in a single column in Part l and enter “951A” on line determine the source of the compensation entered on
i. line 1a.

High-taxed income. Passive income doesn't include In addition, attach to Form 1116 a statement that contains
high-taxed income. High-taxed income is income if the the following information.
foreign taxes you paid on the income (after allocation of Your name and social security number (written across the
expenses) exceed the highest U.S. tax that can be imposed •
top of the statement).
on the income. See Regulations section 1.904-4(c) for more The specific compensation income or the specific fringe
information. If you have passive income that is high-taxed •
benefit for which the alternative basis is used.
income, use a separate column in Part I. Enter “HTKO” on For each such item, the alternative basis of allocation of
line i of Forms 1116 for passive category income and the •
source used.
other category of income to which such passive category For each such item, a computation showing how the
income is reclassified. On your Form 1116 for passive •
alternative allocation was computed.
category income, passive income that is treated as another A comparison of the dollar amount of the compensation
category of income because it is high taxed should be •
sourced within and without the United States under both the
included on line 1a in the column for the country entered on alternative basis and the time or geographical basis for
line i. Also, enter the high-taxed income in the “HTKO” determining the source.
column on line 1a as a negative number. On your Form 1116
for the other category of income, the high-taxed income You must keep documentation showing why the
should be entered as a positive number on line 1a in the alternative basis more properly determines the source of the
“HTKO” column. Don't enter any amounts on lines 2 through compensation.
5 for your “HTKO” column. Add all deductions that are
definitely related or apportioned to passive income that is Lines 2 Through 5—Deductions and Losses
treated as another category of income because it is high
You must reduce your foreign gross income on line 1a by
taxed and enter the total amount of those deductions on
entering on lines 2 through 5:
line 6 in the appropriate “HTKO” column. Enter the amount as
a negative number in the “HTKO” column on your Form 1116 • Any of your deductions that definitely relate to that foreign
income; and
for passive category income. Enter the amount as a positive
number in the “HTKO” column on your Form 1116 for the • A ratable share of your other deductions that don't
definitely relate to that foreign income, any other foreign
other category of income. See the instructions for line 13,
income, or U.S. source income.
later.
Don't include deductions and losses related to exempt or
Lines 1a and 1b—Foreign Gross Income excluded income such as foreign earned income you have
Include income in the category checked above Part I that is excluded on Form 2555 on lines 2 through 5.
taxable by the United States and is from sources within the
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 If the law of a U.S. state to which you pay income taxes
Income. 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 Line 2
dividends on line 1a, and write “Dividends” on the dotted line.
On the other Form 1116, check box d (general category Enter your deductions that definitely relate to the gross
income), enter on line 1a wages not excluded on Form 2555, income from foreign sources shown on line 1a. For example,
and write “Wages” on the dotted line. Complete Parts I, II, if you are reporting foreign business income on line 1a,
and III of each Form 1116. Then, complete Part IV on the include on line 2 business expenses such as supplies and
Form 1116 with the larger amount entered on line 24. advertising incurred as part of operating the foreign business.
If you are filing a Form 1116 that includes foreign
Don't include any interest expense on line 2. See lines 4a
! source qualified dividends or foreign source capital and 4b for special rules for interest expense.
CAUTION gains or losses, see Foreign Qualified Dividends and
Capital Gains (Losses), earlier.
Lines 3a and 3b

Line 1b Some deductions don't definitely relate to either your foreign
source income or your U.S. source income. Enter on lines 3a
You must check the box on line 1b if all of the following apply. and 3b any deductions (other than interest expense) that:
• The income on line 1a is compensation for services you • Aren't shown on line 2, and
performed as an employee. • Aren't definitely related to your U.S. source income.
• Your total employee compensation from both U.S. and
foreign sources was $250,000 or more. Line 3a. Enter the following itemized deductions (from
Schedule A (Form 1040)) on line 3a.
• Medical expenses (line 4).
• General sales taxes (line 5a).

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• Real estate taxes for your home (line 5b).                     Line 3f
  If you don't itemize deductions, enter your standard 
deduction on line 3a.                                            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, 
Line 3b.  Enter on line 3b any other deductions that don't       round off to 0.8757, not to 0.876 or 0.88). Enter the result, but 
definitely relate to any specific type of income (for example,   don't enter more than “1.”
the deduction for alimony paid from Schedule 1 (Form 1040), 
line 19a).
                                                                 Line 4a

Lines 3d and 3e                                                  If your gross foreign source income (including income 
                                                                 excluded on Form 2555) doesn't exceed $5,000, you can 
For lines 3d and 3e, gross income means the total of your        allocate all of your interest expense to U.S. source income. 
gross receipts (reduced by cost of goods sold), total capital    Otherwise, deductible home mortgage interest including 
and ordinary gains (before subtracting any losses), and all      points is apportioned using a gross income method. Use the 
other income (before subtracting any deductions).                Worksheet for Home Mortgage Interest to figure the amount 
Line 3d.  Enter your gross foreign source income from the        to enter on line 4a.
category you checked above Part I of this
Form 1116. Include any foreign earned income you have            Line 4b
excluded on Form 2555 but don't include any other exempt 
income.                                                          Other interest expense includes investment interest, interest 
  If you had income from more than one country, you must         incurred in a trade or business, and passive activity interest. 
enter income from only one country in each column.               If you are a U.S. citizen, resident alien, or a domestic estate, 
                                                                 and your gross foreign source income (including any income 
  If you had to adjust your foreign qualified dividends or       excluded on Form 2555) doesn't exceed $5,000, you can 
capital gains (discussed earlier), include those amounts         allocate all of your interest expense to U.S. source income. 
without regard to any adjustments.                               Otherwise, each type of interest expense is apportioned 
Line 3e.  Enter on line 3e in each column your gross income      separately using an “asset method.” See Pub. 514 for more 
from all sources and all categories, both U.S. and foreign.      information.
"Gross income from all sources" is a constant amount (that          Example. You have investment interest expense of 
is, you will enter the same amount on line 3e for each column    $2,000. Your assets of $100,000 consist of stock generating 
of all Forms 1116 that you file). Include any foreign earned     U.S. source income (adjusted basis, $40,000) and stock 
income you have excluded on Form 2555 but don't include          generating foreign source income (adjusted basis, $60,000). 
any other exempt income.                                         You apportion 40% ($40,000/$100,000) of $2,000, or $800, 
  If you are a nonresident alien, include on both lines 3d and   of your investment interest to U.S. source income and 60% 
3e your income that isn't effectively connected with a trade or  ($60,000/$100,000) of $2,000, or $1,200, to foreign source 
business in the United States.                                   income. In this example, you will enter the $1,200 
  If you had to adjust your foreign qualified dividends or       apportioned to foreign source income on line 4b. You 
capital gains (discussed earlier), include those amounts         wouldn't enter the $800 apportioned to U.S. source income 
without regard to any adjustments.                               on any line of Part I of Form 1116.

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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Line 5 tax year on Form 1116, line 10, or if you generated a foreign
tax carryover in the current year. You don't need to file
If you have capital losses from foreign sources, see Foreign Schedule B (Form 1116) for 2022 if you carry back a foreign
Qualified Dividends and Capital Gains (Losses), earlier, for tax to 2022, and don't otherwise need to file Schedule B
information on adjustments you may be required to make. (Form 1116). See the Instructions for Schedule B (Form
1116) for more information.
Part II—Foreign Taxes Paid or You can carry back 1 year and then forward 10 years any
Accrued foreign tax you paid or accrued to any foreign country or U.S.
possession (reduced as described under Line 12, later) on
See General Instructions, earlier, for descriptions of income in a separate category that is more than the
! foreign taxes that are eligible for the foreign tax credit limitation. First, apply the excess to the earliest year to which
CAUTION and for foreign taxes that aren't eligible for the foreign it may be carried. Then, apply it to the next earliest year, and
tax credit. so on. The carryback-carryforward period can't be extended
even if you are unable to take a credit in 1 of the intervening
Generally, you can take a foreign tax credit in the tax year
years.
you paid or accrued the foreign taxes, depending on your
method of accounting. If you report on the cash basis, you Special rules apply to the carryback and carryforward of
can choose to take the credit for accrued taxes by checking foreign taxes paid or accrued on foreign oil and gas income.
the “Accrued” box in Part II on a timely filed original return. See section 907(f).
You can’t make this choice on an amended return. Once you
choose to do this, you must credit foreign taxes in the year No foreign tax carryovers are allowed for foreign taxes
they accrue on all future returns. paid or accrued on section 951A category income. Leave
Generally, you must enter in Part II the amount of foreign line 10 of Form 1116 blank if you complete a Form 1116 for
taxes, in both the foreign currency denomination(s) and as section 951A category income, as carrybacks and carryovers
converted into U.S. dollars, that relate to the category of aren’t allowed for this category of income.
income checked above Part I. Taxes are related to the File Form 1040-X or other amended return and a revised
income if the income is included in the foreign tax base on Form 1116 for the earlier tax year to which you are carrying
which the tax is imposed. If the foreign tax you paid or back excess foreign taxes.
accrued relates to more than one category of income,
apportion the tax among the categories. The apportionment Special rules for carryforwards of pre-2018 unused for-
is based on the ratio of net foreign taxable income in each eign taxes. Unused foreign taxes in the pre-2018 separate
category to the total net income subject to the foreign tax. category for general income carried forward are generally
See Allocation of Foreign Taxes in Pub. 514 for an example. allocated to your post-2017 separate category for general
income. Alternatively, you can allocate those foreign taxes to
Enter in Part II the foreign taxes that were previously the post-2017 separate category for foreign branch category
suspended under section 909 and that are allowed in 2022 income to the extent the unused foreign taxes would have
because the related income is taken into account in 2022. been allocated to your post-2017 separate category for
Enter “909 taxes” in column (l) instead of the date paid or foreign branch category income, and would have been
accrued. Complete the other columns as appropriate. unused foreign taxes with respect to that separate category,
If foreign tax paid on passive income is reported to if that separate category had applied in the year or years the
TIP you in U.S. dollars on a Form 1099-DIV, 1099-INT, or unused foreign taxes arose. A simplified safe harbor is also
similar statement, you don't have to convert the available for determining the portion of the unused foreign
amount shown into foreign currency. This rule applies taxes that may be allocated to the post-2017 separate
whether or not you can make the election to claim the foreign category for foreign branch category income. See
tax credit without filing Form 1116 (as explained earlier). Regulations section 1.904-2(j)(1)(iii) for further details.
Enter “1099 taxes” in Part II, column (l), and complete Restrictions. You can't carry a credit back to a tax year for
columns (q) through (u) for each foreign country indicated in which you claimed a deduction, rather than a credit, for
Part I. foreign taxes paid or accrued. However, you must reduce the
amount of any carryback or carryforward by the amount that
Note. If you are taking a credit for additional taxes paid or you would have used had you chosen to claim a credit rather
accrued as the result of an audit by a foreign taxing authority than a deduction in that year.
or you are filing an amended return reflecting a foreign tax If, for any year, you elected to claim the foreign tax credit
refund, attach a statement to Form 1116 identifying these without filing Form 1116 (as explained earlier), the following
taxes. rules apply.
• You can't carry over unused foreign taxes paid or accrued
Part III—Figuring the Credit in a year to which the election doesn't apply to or from any
year for which you made the election.
Line 10 • The carryback-carryforward period isn't extended if you
are unable to use a carryback or carryforward because you
Enter the unused foreign taxes in the separate category from
made the election.
another tax year that are eligible to be carried forward to or
back to 2022. The amount of foreign taxes carried forward to • Don't reduce the carryback or carryforward by the amount
you would have used in the election year if you hadn't made
the current tax year is the amount from Schedule B (Form
the election.
1116), line 3, column (xiv). Attach Schedule B (Form 1116) to
your Form 1116 for each applicable separate category of More information. See Pub. 514 for more information on
income if you enter a carryover of foreign taxes from a prior carryback and carryforward provisions, including examples.

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Line 12 Note. The reduction in foreign taxes is reduced by any dollar
You may have to reduce the foreign taxes you paid or penalty imposed under section 6038(b).
accrued by the following items.
• Taxes on income excluded on Form 2555. Reduce • Reduction for failure to file Form 8865. U.S. partners
taxes paid or accrued by the taxes allocable to any foreign who control a foreign partnership must file Form 8865, Return
earned income excluded on Form 2555. If only part of your of U.S. Persons With Respect to Certain Foreign
foreign earned income is excluded, you must determine the Partnerships. If you don't file Form 8865 and furnish all of the
amount of tax allocable to excluded income. To do so, information required by the due date of your tax return,
multiply the foreign taxes paid or accrued on foreign earned reduce by 10% all foreign taxes that you may otherwise take
income received or accrued during the tax year by the into account for the foreign tax credit. You may have to make
following fraction. additional reductions if the failure continues. See section
6038(c) and Regulations section 1.6038-3(k) for details and
Numerator: Foreign earned income and housing amounts exceptions.
you excluded for the tax year minus otherwise deductible
expenses (not including the foreign housing deduction) Note. The reduction in foreign taxes is reduced by any dollar
allocable to that income. penalty imposed under section 6038(b).
Denominator: Your total foreign earned income received
or accrued during the tax year minus deductible expenses • Reduction of taxes or credit due to international
(including the foreign housing deduction) allocable to that boycott operations. In general, if you agree to participate
income. However, if the foreign jurisdiction charges tax on in, or cooperate with, an international boycott, you must file
foreign earned income and some other income (for example, Form 5713, International Boycott Report, and attach all
earned income from U.S. sources or a type of income not supporting schedules. In addition, you must reduce either the
subject to U.S. tax) and the taxes on the other income can't total taxes available for credit or the credit otherwise
be segregated, the denominator is the total amount of allowable by your foreign taxes resulting from boycott
income subject to foreign tax minus deductible expenses activities. If you can figure the taxes specifically attributable
allocable to that income. to boycott operations, enter the amount on line 12. If you
• Taxes on income from Puerto Rico exempt from U.S. can't figure the amount of taxes specifically attributable to
tax. The reduction applies if you have income from Puerto boycott operations, multiply the credit otherwise allowable by
Rican sources that isn't taxable on your U.S. tax return. To the international boycott factor (figured on Schedule A (Form
figure the credit, reduce your foreign taxes paid or accrued 5713), International Boycott Factor) and enter the result on
by the taxes allocable to the exempt income. See Pub. 570 Form 1116, line 34. Attach a statement to Form 1116
for more information. showing in detail how you figured the reduction.
• Taxes on income from American Samoa excluded on For more information, see Form 5713 and its instructions.
Form 4563. If you are a bona fide resident of American
Samoa, reduce taxes paid or accrued by any taxes • Taxes related to a foreign tax credit splitting event.
attributable to income from sources in American Samoa Reduce taxes paid or accrued by any taxes paid or accrued
excluded on Form 4563. For more information, see Pub. 570. with respect to a foreign tax credit splitting event. If there is a
• Taxes on combined foreign oil and gas income. foreign tax credit splitting event, you may not take the foreign
Reduce taxes paid or accrued by a portion of taxes imposed tax into account before the tax year in which you take the
on combined foreign oil and gas income. The amount of the income into account. There is a foreign tax credit splitting
reduction is the amount by which your foreign oil and gas event with respect to a foreign income tax if the related
taxes exceed the amount of your combined foreign oil and income is (or will be) taken into account by a covered person.
gas income for the year multiplied by a fraction equal to your A covered person is either of the following.
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 least a 10% ownership interest (determined by vote or value).
taxes 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.
Foreign oil and gas taxes are the sum of foreign oil and gas A covered asset acquisition under section 901(m) isn't a
extraction taxes and foreign oil-related taxes. foreign tax credit splitting event under section 909.
• 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 relate to passive income that is treated as other category
Form 5471, Information Return of U.S. Persons With Respect income because it is high taxed. On your Form 1116 for
To Certain Foreign Corporations. If you don't file Form 5471 passive category income, enter as a negative number (in
and furnish all of the information required by the due date of parentheses) the amount of your foreign taxes that relate to
your 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 income, enter as a positive number the amount of foreign
may have to make additional reductions if the failure taxes that relate to that income.
continues. 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),
before adjustments, from sources outside the United States.

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If the amount on line 15 is zero or a loss, you generally have The amount of the loss that would reduce passive
no foreign tax credit for the category of income checked category income would be 80% ($4,000/$5,000) of the
above Part I of this Form 1116. However, you must complete $2,000 loss, or $1,600. Include the $1,600 (in parentheses)
line 16 and continue with the form even if line 15 is zero or a on line 16 of the passive category income Form 1116.
loss. Assuming you have no other line 16 adjustments, enter
$2,400 ($4,000 − $1,600) on line 17 of that form.
Line 16 The amount of the loss that would reduce the certain
You are required to increase or decrease the amount on income re-sourced by treaty would be 20% ($1,000/$5,000)
line 15 by the following adjustments. The adjustments must of the $2,000 loss, or $400. Include the $400 (in
be made in the order listed. If you have more than one parentheses) on line 16 of the certain income re-sourced by
adjustment, enter the net adjustment on line 16 and attach a treaty Form 1116. Assuming you have no other line 16
detailed statement showing your computation. See Pub. 514 adjustments, enter $600 ($1,000 − $400) on line 17 of that
for more details on these adjustments. form.
The adjustments are as follows. In this case, all of the $2,000 loss was allocated between
the foreign source passive category income and the certain
1. Adjustment for disallowed business loss under sec- income re-sourced by treaty category, and no reduction was
tion 461(l). Increase the amount on line 15 by the amount of made to U.S. source income.
any business loss that is disallowed under section 461(l) to
the extent it is attributable to the separate category of income If you receive general category income in a later year, you
of the applicable Form 1116. For purposes of adjustments 2– must recharacterize all or part of that income as passive
6 described below, any reference to an amount on line 15 category income and certain income re-sourced by treaty in
shall mean the amount on line 15 after taking into account that later year. See the example under 5. Recapture of
this adjustment for disallowed business loss. separate limitation loss accounts, later.
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
including (in parentheses) on line 16 the allocable portion of
If the loss reduces foreign source income, you must any U.S. loss. In later years, you will be allowed to treat part
create, or increase the balance of, a separate limitation loss of your U.S. source income as foreign source income.
account and you must recharacterize the income you receive
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 You allocate the net loss to a separate category of income
limitation loss account with respect to the first category, then by multiplying the net loss by a fraction. The numerator of the
the two offsetting separate limitation loss account balances fraction is the foreign source income in a separate category,
are netted for purposes of determining the amount of income and the denominator is the total foreign source income in all
in either category that is subject to recharacterization under separate categories.
5. Recapture of separate limitation loss accounts, later.
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 If you had an overall foreign loss in a prior year that offset
by the amount you entered on line 4 of Worksheet A or line 5 U.S. source income, a part of your foreign income (in the
of 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 income in each following tax year.
Worksheet A or Worksheet B, see Pub. 514 to determine The part of your total foreign income subject to
your U.S. source income. recharacterization is the lesser of the following.
Example. For 2022, 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.

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ii. The balance in the overall foreign loss account for that loss category relating to more than one other category and
category. the total balances in those loss accounts exceed the income
b. 50% (or more, if you choose) of your total taxable you receive in 2022 in the loss category, then income in the
income from foreign sources. loss category is recharacterized as income in those other
categories in proportion to the balances of the separate
If the total foreign income subject to recharacterization is limitation loss accounts for those other categories. You
the amount described in (a), earlier, then for each separate recharacterize the income by:
category the recapture amount is the maximum potential Increasing the amount on line 15 (adjusted by any of the
•
recapture amount for that category. If the total foreign income other adjustments previously mentioned in these line 16
subject to recharacterization is the amount described in (b) instructions) of the Form 1116 for each of the separate
above, then for each separate category the recapture amount categories, other than the loss category, previously reduced
is computed by multiplying the total recapture amount by the by including on line 16 any recharacterized income; and
following fraction: Decreasing the amount on line 15 (adjusted by any of the
•
other adjustments previously mentioned in these line 16
Maximum potential recapture amount for the overall foreign loss instructions) of the Form 1116 for the loss category by
account in the separate category including on line 16 the amount of recharacterized income as
Total amount of maximum potential recapture in all overall a negative number (in parentheses).
foreign loss accounts Example. Using the facts in the Example under
2. Allocation of foreign losses, earlier, in the next year (2023),
you have $5,000 of general category income, $3,000 of
Reduce the amount on line 15 by including (in passive category income, and $500 of certain income
parentheses) on line 16 the amount of the recapture for the re-sourced by treaty. Because $1,600 of the general
category checked above Part I, as determined above. Be category income loss was used to reduce your passive
sure to attach your computation. If you elect to recapture category income in 2022, $1,600 of your 2023 general
more of an overall foreign loss than is required ((b) above), category income must be recharacterized as passive
show in your computation the percentage of taxable income category income. Similarly, $400 of the general category
recharacterized and the dollar amount recharacterized. income must be recharacterized as certain income
Attach a statement to Form 1116 showing the balance in re-sourced by treaty. On your 2023 Form 1116 for passive
each separate category overall foreign loss account. See category income, you would include $1,600 on line 16. On
Regulations section 1.904(f)-1(b) for more information. your 2023 Form 1116 for certain income re-sourced by
Dispositions of certain property. If you generated treaty, you would include $400 on line 16. On your 2023
foreign source gain in the same category as the overall Form 1116 for general category income, you would include
foreign loss on a disposition of property that was used ($2,000) on line 16.
predominantly in a foreign trade or business and that
Recharacterizing income from a separate category
generated foreign source income in the same category as the
TIP doesn't result in recharacterizing any tax.
overall foreign loss, then the gain on the disposition may be
subject to recharacterization as U.S. source income to the
extent of 100% of your foreign source taxable income. This is 6. Recapture of overall domestic loss accounts. If you
true whether or not you would otherwise recognize gain on have an overall domestic loss for any tax year beginning after
the disposition. See section 904(f)(3). 2006, you must create, or increase the balance in, an overall
The above rule also generally applies to a gain on the domestic loss account and you must recharacterize a portion
disposition of stock in a CFC, if you owned more than 50% of your U.S. source taxable income as foreign source taxable
(by vote or value) of the stock right before you disposed of it. income in succeeding years for purposes of the foreign tax
See section 904(f)(3)(D) for more information and credit.
exceptions. The part that is treated as foreign source taxable income
Reduce line 15 by including (in parentheses) on line 16 for the tax year is the smaller of:
the smallest of: • The total balance in your overall domestic loss account in
each separate category (less amounts recaptured in earlier
a. The amount of the gain not recaptured above; years), or
b. The remaining amount of the overall foreign loss not • 50% of your U.S. source taxable income for the tax year.
recaptured in earlier years or in the current year; or
Under the Tax Cuts and Jobs Act, section 904(g)(5)
c. The amount from line 15 (less any adjustment for ! allows for an election to recapture up to 100% of any
allocation of losses, as described earlier under 2. Allocation CAUTION pre-2018 unused overall domestic loss from a prior
of foreign losses and under 3. Allocation of U.S. losses, and year, as opposed to the 50% stated in the previous
any adjustment for any recapture above). paragraph. This election is applicable for any tax year
See Pub. 514 if you disposed of property described above beginning after December 31, 2017, and before January 1,
and you recognized foreign source gain in a different 2028.
category than the overall foreign loss, you recognized U.S.
source gain, or you didn't recognize gain. You must establish and maintain separate overall
domestic loss accounts for each separate category in which
5. Recapture of separate limitation loss accounts. If, in foreign source income is offset by the domestic loss. The
a prior tax year, you reduced your foreign taxable income in balance in each overall domestic loss account is the amount
the category checked above Part I by a pro rata share of a of the overall domestic loss subject to recapture. The
loss from another category, you must recharacterize in 2022 recharacterized income is allocated among and increases
all or part of any income you receive in 2022 in that loss foreign source income in separate categories in proportion to
category. If you have separate limitation loss accounts in the the balances of the overall domestic loss accounts for those

-22- Instructions for Form 1116 (2022)

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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 below 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.  

separate categories. You increase the amount on line 15 (as          Individuals Who Completed a Qualified Dividends 
adjusted by any of the other adjustments previously                  and Capital Gain Tax Worksheet
mentioned in these line 16 instructions) of the Form 1116 for 
each of the separate categories to which the recharacterized         If you completed the Qualified Dividends and Capital Gain 
income is allocated.                                                 Tax Worksheet in the Instructions for Form 1040, you must 
Overall domestic loss defined.    In a tax year in which             use the Worksheet for Line 18 to figure the amount to enter 
you choose to claim the foreign tax credit, the overall              on line 18 if:
domestic loss is the domestic loss for that tax year to the 
extent that it offsets foreign source taxable income for that        1. Line 5 of your Qualified Dividends and Capital Gain 
tax year or for any preceding tax year (in which you choose to       Tax Worksheet is greater than zero, and
claim the foreign tax credit) because of a carryback. If you         2. Line 23 of your Qualified Dividends and Capital Gain 
don't choose to claim the foreign tax credit for a tax year, the     Tax Worksheet is less than line 24 of that worksheet.
overall domestic loss is the domestic loss for that tax year to 
the extent that it offsets foreign source taxable income for         Adjustment exception.                             If you qualify for the adjustment 
any preceding tax year (in which you chose to claim the              exception, you can elect not to adjust your qualified 
foreign tax credit) because of a carryback.                          dividends and capital gains. You make this election by not 
Domestic loss. A domestic loss is the amount by which                completing the Worksheet for Line 18. You must make this 
the U.S. source gross income for the tax year is exceeded by         election if you have any foreign qualified dividends or foreign 
the sum of the expenses, losses, and other deductions                capital gains (or losses) and you chose not to make any 
properly allocated or apportioned to that income. Determine          adjustments to those amounts when you completed lines 1a 
this amount by taking into account any net operating loss            and 5. You can't make this election if you have any foreign 
carried forward from a prior tax year (but not any loss carried      qualified dividends or foreign capital gains (or losses) and 
back). If you have any capital gains or losses, take them into       you made adjustments to those amounts when you 
account after any adjustments required under Foreign                 completed lines 1a and 5. In this case, complete the 
Qualified Dividends and Capital Gains (Losses), earlier.             Worksheet for Line 18.
                                                                     If you aren't required to complete the Worksheet for 
Line 18                                                              Line 18 or you qualify for the adjustment exception and elect 
If you have qualified dividends or capital gains, you may be         not to adjust your qualified dividends and capital gains, enter 
required to make adjustments to those qualified dividends            on line 18 of Form 1116 your taxable income from Form 
and gains before you take those amounts into account on              1040, 1040-SR, or 1040-NR, line 15.
line 18.                                                             You qualify for the adjustment exception if you meet both 
                                                                     of the following requirements.

Instructions for Form 1116 (2022)                                -23-

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1. Line 5 of the Qualified Dividends and Capital Gain Tax on line 18 of Form 1116 the estate's or trust's taxable income
Worksheet doesn't exceed: without the deduction for its exemption.
a. $340,100 if married filing jointly or qualifying surviving Completing the Worksheet for Line 18. If you do need to
spouse, complete the Worksheet for Line 18, do the following.
b. $170,050 if married filing separately, Lines 2 through 5. Skip these lines.
c. $170,050 if single, or Line 6. Enter the amount from line 18 of the Qualified
Dividends Tax Worksheet or line 40 of Schedule D.
d. $170,050 if head of household.
Line 8. Enter the amount from line 14 of the Qualified
2. The amount of your foreign source net capital gain, Dividends Tax Worksheet or line 36 of Schedule D.
plus the amount of your foreign source qualified dividends, is Line 10. Enter the amount from line 8 of the Qualified
less than $20,000. Dividends Tax Worksheet or line 30 of Schedule D.
If you are subject to the alternative minimum tax, see the
special rules in Regulations section 1.904(b)-1(b)(3). Complete all other lines as instructed on the worksheet.
Your foreign source net capital gain is the excess of
TIP your foreign source net long-term capital gain over Taxpayers Who Completed the Schedule D Tax
your foreign source net short-term capital loss. Worksheet

Completing the Worksheet for Line 18. If you do need to If you figured your tax using the Schedule D Tax Worksheet
complete the Worksheet for Line 18, do the following. (in the Schedule D (Form 1040) instructions or in the
Lines 2 through 5. Skip these lines. Schedule D (Form 1041) instructions), you may have to use
Line 6. Enter the amount from line 20 of the Qualified the Worksheet for Line 18 to figure the amount of tax to enter
Dividends and Capital Gain Tax Worksheet. on line 18 of Form 1116.
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
Worksheet, line 5 of that worksheet is greater than zero, and
dividends and capital gains. You make this election by not
line 21 of that worksheet is less than line 22; or
completing the Worksheet for Line 18. You must make this
2. You figured your tax using Part V of Schedule D (Form election if you have any foreign qualified dividends or foreign
1041), line 27 of Schedule D is greater than zero, and line 43 capital gains (or losses) and you chose not to make any
of Schedule D is less than line 44. adjustments to those amounts when you completed lines 1a
and 5. You can't make this election if you have any foreign
Adjustment exception. If you qualify for the adjustment qualified dividends or foreign capital gains (or losses) and
exception, you can elect not to adjust your qualified you made adjustments to those amounts when you
dividends and capital gains. You make this election by not completed lines 1a and 5. In this case, complete the
completing the Worksheet for Line 18. You must make this Worksheet for Line 18.
election if you have any foreign qualified dividends or foreign
capital gains (or losses) and you chose not to make any You qualify for the adjustment exception if:
adjustments to those amounts when you completed lines 1a 1. The amount of your foreign source qualified dividends,
and 5. You can't make this election if you have any foreign plus the amount of your foreign source net capital gain, is
qualified dividends or foreign capital gains (or losses) and less than $20,000; and
you made adjustments to those amounts when you 2. Line 18 of the Schedule D Tax Worksheet in the
completed lines 1a and 5. In this case, complete the Schedule D (Form 1040) instructions is less than or equal to:
Worksheet for Line 18. See section 904(b) and the
a. $340,100 if married filing jointly or qualifying surviving
regulations issued under that Code section to determine if
spouse,
you qualify for the adjustment exception.
b. $170,050 if married filing separately,
Your foreign source net capital gain is the excess of
TIP your foreign source net long-term capital gain over c. $170,050 if single, or
your foreign source net short-term capital loss. d. $170,050 if head of household.
If you aren't required to complete the Worksheet for (Or, for trusts and estates, see section 904(b) and the
Line 18 or you qualify for the adjustment exception and elect regulations issued under that Code section to determine if
not to adjust your qualified dividends and capital gains, enter you qualify for the adjustment exception.)

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If you are subject to the alternative minimum tax, see the You may need to adjust the amount you report on
special rules in Regulations section 1.904(b)-1(b)(3). Form 1116, line 20, by the amounts reported on Form
8978, line 14. If you file Form 8978, Partner’s Additional
Your foreign source net capital gain is the excess of
Reporting Year Tax, you will need to increase or decrease
TIP your foreign source net long-term capital gain over
the amount you report on Form 1116, line 20, by the amount
your foreign source net short-term capital loss.
of any positive or negative tax from Form 8978, line 14, that
Ignore any foreign source qualified dividends or capital gains
you report on your tax return and that isn’t already included
that you elected to include on Form 4952, line 4g, in
on the lines specified earlier. For example, for Form 1040, a
determining the amount of your foreign source qualified
positive Form 8978 adjustment is already included in the tax
dividends and net capital gain.
reported on Form 1040, line 16, while a negative tax
If you aren't required to complete the Worksheet for adjustment is not. If after your adjustment, the amount of your
Line 18 or you qualify for the adjustment exception and elect tax is zero or less, enter -0- on Form 1116, line 20. If any
not to adjust your qualified dividends and capital gains, enter additional guidance is provided related to reporting amounts
on line 18 of Form 1116 your taxable income without the from Form 8978 on Form 1116, we will post it at IRS.gov/
deduction for your exemption (for example, the amount from Form1116 under Recent Developments.
Form 1040, 1040-SR, or 1040-NR, line 15).
Line 22
If you do need to complete the Worksheet for Line 18, do
the following. Enter the amount of any increase to your limitation as
Line 2. Enter the amount (if any) from line 42 of the determined under the excess limitation rules of section
Schedule D Tax Worksheet in the Schedule D (Form 1040) 960(c).
instructions or line 39 of the Schedule D Tax Worksheet in
Line 24
the Schedule D (Form 1041) instructions.
Line 4. Enter the amount (if any) from line 39 of the The maximum foreign tax credit you can claim in the current
Schedule D Tax Worksheet in the Schedule D (Form 1040) year is generally limited to the allocated amount of U.S. tax
instructions or line 36 of the Schedule D Tax Worksheet in imposed on the foreign income, or the actual amount of
the Schedule D (Form 1041) instructions. foreign tax paid or accrued on the foreign income (after
Line 6. Enter the amount (if any) from line 33 of the reductions required on line 12), whichever is less. However,
Schedule D Tax Worksheet in the Schedule D (Form 1040) see Foreign Taxes Eligible for a Credit, earlier, for additional
instructions or line 30 of the Schedule D Tax Worksheet in information.
the Schedule D (Form 1041) instructions. If the amount on line 23 is smaller than the amount on
Line 8. Enter the amount (if any) from line 30 of the line 14, see Pub. 514 for more information on carryback and
Schedule D Tax Worksheet in the Schedule D (Form 1040) carryforward provisions, including examples.
instructions or line 26 of the Schedule D Tax Worksheet in
the Schedule D (Form 1041) instructions.
Part IV—Summary of Credits From
Line 10. Enter the amount (if any) from line 22 of the
Schedule D Tax Worksheet in the Schedule D (Form 1040) Separate Parts III
instructions or line 19 of the Schedule D Tax Worksheet in Complete lines 25 through 31 in Part IV only if you must
the Schedule D (Form 1041) instructions. complete more than one Form 1116 because you have more
than one of the categories of income listed above Part I.
Complete all other lines as instructed on the worksheet.
Complete Part IV on only one Form 1116 (the one with the
Line 20 largest amount entered on line 24) to summarize the credits
If you are completing line 20 for separate category g you figured on all of your Forms 1116. However, see
(lump-sum distributions), enter the amount from line 5 of the Exception, later. Enter the credits from line 24 of all of your
Worksheet for Lump-Sum Distributions. Forms 1116 on lines 25 through 31 of the Form 1116 you are
using to summarize your credits. File the other Forms 1116
Don't complete line 20 for separate category (section e as attachments.
901(j) income), discussed earlier.
Exception. If you completed a Form 1116 for category g
For all other applicable categories, complete line 20 as (lump-sum distributions) or (section 901(j) income), e don't
follows. use Part IV of that Form 1116 as your summary, unless you
Individuals. Enter the total of Form 1040, 1040-SR, or are filing both a Form 1116 for category and a Form 1116 g
1040-NR, line 16, and Schedule 2 (Form 1040), Part I, line 2, for category but no other category.e
less any tax included on line 16 from Form 4972.
Line 33
Estates and trusts.
Enter the smaller of line 20 or line 32.
• Form 1041 filers. Enter the amount from Form 1041,
Schedule G, line 1a. Note. Generally, line 32 will exceed line 20 only if you have
• Form 990-T filers. Enter the total of Form 990-T, Part II, U.S. capital gains or qualified dividends that are subject to
lines 2, 3, 4, and 6. However, don't include any taxes listed in the capital gain rate differential (figured in the Worksheet for
section 26(b) that are included in Part II, line 4. For example, Line 18).
don't include the base erosion minimum tax under section
59A, and the tax and interest on a nonqualified withdrawal
from a capital construction fund (section 7518).
• Form 1040-NR filers. Enter the amount from Form
1040-NR, line 16, less any tax included on line 16 of Form
1040-NR from Form 4972.

Instructions for Form 1116 (2022) -25-

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Schedule B (Form 1116) and Schedule C (Form tax returns and return information are confidential, as
1116) required by section 6103.
See the separate instructions for Schedule B (Form 1116) The time needed to complete and file this form will vary
and Schedule C (Form 1116) to see if you must file these depending on individual circumstances. The estimated
schedules. burden for individual taxpayers filing this form is approved
under OMB control number 1545-0074 and is included in the
Paperwork Reduction Act Notice. We ask for the estimates shown in the instructions for their individual income
information on this form to carry out the Internal Revenue tax return. The estimated burden for all other taxpayers who
laws of the United States. You are required to give us the file this form is Recordkeeping, 2 hr., 43 min.; Learning
information. We need it to ensure that you are complying with about the law or the form, 1 hr., 1 min.; Preparing the
these laws and to allow us to figure and collect the right form, 1 hr., 42 min.; Copying, assembling, and sending
amount of tax. the form to the IRS, 34 min.
You aren't required to provide the information requested If you have comments concerning the accuracy of these
on a form that is subject to the Paperwork Reduction Act time estimates or suggestions for making this form simpler,
unless the form displays a valid OMB control number. Books we would be happy to hear from you. You can write to the
or records relating to a form or its instructions must be IRS at the address listed in the instructions of the tax return
retained as long as their contents may become material in with which this form is filed.
the administration of any Internal Revenue law. Generally,

-26- Instructions for Form 1116 (2022)

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