Question

Foreign Tax Credit for TDS paid on sale of inherited property

Forum|Forum|2 years ago
March 12, 2024
1 reply
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Hello

I inherited property in India in 2020 and sold it in 2023. I received reduced amount of money after TDS (Taxes deducted at Source) was deducted from the sale price. I have filed income tax returns in India and part of the TDS was refunded, but not all of it. This all happened in 2023. Can I take Foreign Tax Credit for the remainder of the TDS amount on my 2023 tax return? Due to Exchange rate, estimated price of the property in 2020 is more than the 2023 sale price. So there is no profit.

T

ThomasM125

The foreign taxes would only be allowed as a credit on your US tax return to the extent of your US tax on your foreign income. Since you had a loss on the property sale, you would only be able to use the foreign tax credit if you had other foreign income on your US tax return in 2023. You could enter the foreign tax paid in 2023 to report the foreign taxes to generate a foreign tax credit carryover to future years when you may have foreign income, however. You can also elect to carry it back one year.

To enter your foreign taxes for the foreign tax credit (carryover), choose the Foreign Taxes option under Estimates and Other Taxes Paid, in the Deductions and Credits section of TurboTax:

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V

vk29Author

I do have other foreign income but it is very small compared to the IDS I paid on the property sale

AmyC

I did not have capital gains when amount was converted into US dollars. But the property was in India and in Indian currency, there was capital gain and I did pay capital gain taxes in India. In TurboTax - Wages and Income - Investment Income - There in no capital gain to enter since the amounts need to be in US $.

Two steps to take:

1. You should enter the inherited house sale under investments, sale of stocks, bonds, other. It will go to form 8949 and on to Sch D. You can claim the loss on your tax return, up to $3,000 and have a carryover for future years, if necessary.

2. Enter the foreign tax paid on form 1116. Foreign tax not used this year can be carried forward up to 10 years and can be carried back one year, if you would like to amend.

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