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R
rkutom
Level 2
July 13, 2022

Foreign Interest Income

  • July 13, 2022
  • 1 reply
  • 14 views

Hello 

I am doing a us tax return for us living in Canada has interest income of $140K is all taxable in us return?!  is there any exclusion as foreign income form (2555)? Also, is tax paid in Canada deductible ? 

on Form 6251 AMT foreign tax credit limitation? dose this apply?? 

Please update me thanks a lot. 

 

 

 

 

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1 reply

sjrcpa
sjrcpa
Level 15
July 13, 2022

If your client is a US citizen or Resident Alien, that Canadian interest income is taxable on his 1040.

No exclusion. The foreign earned income exclusion is for earned income only. Interest is not earned income.

He can claim a Foreign Tax Credit for tax paid to Canada on this income using Form 1116. The Canadian tax could be deducted as an itemized deduction on Sch A instead, but the credit will probably give a better result.

There is a separate foreign tax credit computation for Alternative Minimum Tax. 

The more I know the more I don’t know.
    R
    rkutomAuthor
    Level 2
    July 13, 2022

    Thank you 

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