2023

Instructions for Form 1116

Foreign Tax Credit

(Individual, Estate, or Trust)

Department of the Treasury

Internal Revenue Service

Section references are to the Internal Revenue Code unless 

otherwise noted.

Contents Page

General Instructions ......................... 1

Election To Claim the Foreign Tax Credit 

Without Filing Form 1116 ................. 1

Purpose of Form ......................... 2

Credit or Deduction ....................... 2

Foreign Taxes Eligible for a Credit ............ 2

Foreign Taxes Not Eligible for a Credit ......... 3

Foreign Currency Conversion ............... 3

Foreign Tax Redeterminations ............... 4

Income From Sources Outside the United 

States .............................. 5

Categories of Income ..................... 5

Special Rules ........................... 7

Foreign Qualified Dividends and Capital 

Gains (Losses) ........................ 9

Specific Instructions ........................ 11

Part I—Taxable Income or Loss From Sources 

Outside the United States ............... 11

Part II—Foreign Taxes Paid or Accrued ........ 18

Part III—Figuring the Credit ................ 19

Part IV—Summary of Credits From Separate 

Parts III ............................ 25

Future Developments

For the latest information about developments related to 

Form 1116 and its instructions, such as legislation enacted 

after they were published, go to IRS.gov/Form1116.

What’s New

New checkbox on line 10. If you enter an amount on 

line 10, there is a new checkbox for you to indicate that you 

don't need to attach Schedule B (Form 1116). See the 

instructions for line 10, later.

Final foreign tax credit regulations. Final foreign tax 

credit regulations were published January 4, 2022. The new 

regulations made changes to the rules relating to the 

creditability of foreign taxes under sections 901 and 903, the 

applicable period for claiming a credit or deduction for foreign 

taxes, and the new election to claim a provisional credit for 

contested foreign taxes. A Notice was subsequently released 

on July 21, 2023, allowing taxpayers to apply prior rules in 

place of certain rules provided in the new regulations. The 

rules described in this Notice were modified in part by a 

Notice released on December 11, 2023, to address their 

application to partnerships and their partners and to extend 

the relief period until further notice. For more information, see 

Treasury Decision 9959, 2022-03 I.R.B. 328, available at 

IRS.gov/irb/2022-03_IRB#TD-9959; Notice 2023-55, 

2023-32 I.R.B. 427, available at IRS.gov/irb/

2023-32_IRB#NOT-2023-55; and Notice 2023-80, 2023-52 

I.R.B. 1583, available at IRS.gov/irb/

2023-52_IRB#NOT-2023-80.

Reminders

Alternative minimum tax. In addition to your regular income 

tax, you may be liable for the alternative minimum tax. A 

foreign tax credit may be allowed in figuring this tax. See the 

Instructions for Form 6251, Alternative Minimum 

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.

More Information

For more information about, or assistance with, figuring the 

foreign tax credit, the following IRS resources are available.

Publications. See Pub. 514, Foreign Tax Credit for 

Individuals. The following publications may also be helpful.

• Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens 

Abroad.

• Pub. 519, U.S. Tax Guide for Aliens.

• Pub. 570, Tax Guide for Individuals With Income From U.S. 

Territories.

If you are overseas, call 267-941-1000 (not toll free).

Write to: Internal Revenue Service, International 

Accounts, Philadelphia, PA 19255-0725

General Instructions

Election To Claim the Foreign Tax 

Credit Without Filing Form 1116

You may be able to claim the foreign tax credit without filing 

Form 1116. By making this election, the foreign tax credit 

limitation (lines 15 through 23 of the form) won't apply to you. 

This election is available only if you meet all of the following 

conditions.

• All of your foreign source gross income was “passive 

category income” (which includes most interest and 

dividends). See c. Passive Category Income, later. However, 

for this purpose, passive income also includes (a) income 

subject to the special rule for high-taxed income, described 

later; and (b) certain export financing interest.

• All the income and any foreign taxes paid on it were 

reported to you on a qualified payee statement. Qualified 

payee statements include Form 1099-DIV, Form 1099-INT, 

Schedule K-1 (Form 1041), Schedule K-3 (Form 1065), 

Schedule K-3 (Form 1120-S), or similar substitute 

statements.

Dec 28, 2023 Cat. No. 11441F
• Your total creditable foreign taxes aren't more than $300 

($600 if married filing a joint return).

This election isn't available to estates or trusts.

If you make this election, the following rules apply.

• You can't carry over to or from any other year any foreign 

taxes paid or accrued in a tax year to which the election 

applies (but carryovers to and from other years are 

unaffected). See the instructions for line 10, later.

• You are still required to take into account the general rules 

for determining whether a tax is creditable. See Foreign 

Taxes Eligible for a Credit and Foreign Taxes Not Eligible for a 

Credit, later.

• You are still required to reduce the taxes available for credit 

by any amount you would have entered on line 12 of Form 

1116. See the instructions for line 12, later.

To make the election, just enter on the foreign tax credit 

line of your tax return (for example, Schedule 3 (Form 1040), 

Part I, line 1) the smaller of (a) your total foreign tax, or (b) 

your regular tax. See the instructions for line 20, later, for how 

to figure your regular tax.

Purpose of Form

Who should file. File Form 1116 to claim the foreign tax 

credit if the election, earlier, doesn't apply and:

• You are an individual, estate, or trust; and

• You paid or accrued certain foreign taxes to a foreign 

country or U.S. possession.

See Foreign Taxes Eligible for a Credit, later, to determine 

if the taxes you paid or accrued qualify for the credit.

Don't use Form 1116 to figure a credit for taxes paid to the 

U.S. Virgin Islands. Instead, use Form 8689, Allocation of 

Individual Income Tax to the U.S. Virgin Islands.

Nonresident aliens. If you are a nonresident alien, you 

generally can't take the credit. However, you may be able to 

take the credit if:

• You were a resident of Puerto Rico during your entire tax 

year, or

• You pay or accrue tax to a foreign country or U.S. 

possession on income from foreign sources that is effectively 

connected with a trade or business in the United States. But 

if you must pay tax to a foreign country or U.S. possession on 

income from U.S. sources only because you are a citizen or a 

resident of that country or U.S. possession, don't use that tax 

in figuring the amount of your credit.

See section 906 for more information on the foreign tax 

credit allowed to a nonresident alien individual.

Separate Schedules and Forms

• Use Schedule B (Form 1116) to reconcile your prior year 

foreign tax carryover with your current year foreign tax 

carryover. See Schedule B (Form 1116) and its instructions, 

and the instructions for line 10, later, for more information.

• Use Schedule C (Form 1116) to report foreign tax 

redeterminations that occurred in the current tax year and 

that relate to prior tax years. See Schedule C (Form 1116) 

and its instructions, and Foreign Tax Redeterminations, later, 

for more information.

• Use Form 7204 to consent to extend the time to assess tax 

related to contested foreign income taxes, if you are electing 

to claim a provisional foreign tax credit for the contested 

foreign income taxes.

Credit or Deduction

Instead of claiming a credit for eligible foreign taxes, you can 

choose to deduct foreign income taxes. Form 1040 or 

1040-SR filers choosing to do so would deduct foreign 

income taxes on Schedule A (Form 1040), Itemized 

Deductions. Generally, if you take the credit for any eligible 

foreign taxes, you can't take any part of that year's foreign 

taxes as a deduction. However, even if you take the credit for 

eligible foreign taxes for the year, you can take a deduction 

for the following.

• Foreign taxes not allowed as a credit because of boycott 

provisions.

• Taxes paid to certain foreign countries for which a credit 

has been denied, as described in item 4 under Foreign Taxes 

Not Eligible for a Credit, later.

• Taxes on income or gain that aren't creditable because you 

don't meet the holding period requirement, as described in 

item 5 or 7 under Foreign Taxes Not Eligible for a Credit, later.

• Taxes on income or gain that aren't creditable because you 

have to make related payments, as described in item 6 or 8 

under Foreign Taxes Not Eligible for a Credit, later.

• Certain taxes paid or accrued to a foreign country in 

connection with the purchase or sale of oil or gas extracted in 

that country, as described in item 10 under Foreign Taxes Not 

Eligible for a Credit, later.

• Taxes on income or gain that aren't creditable because 

they were paid or accrued in connection with a covered asset 

acquisition, as described in item 12 under Foreign Taxes Not 

Eligible for a Credit, later.

• If you are an accrual basis taxpayer or if you elected to 

claim your foreign tax credit on an accrual basis, taxes paid 

that relate to a prior tax year in which you elected to claim a 

deduction instead of a credit in that prior year. See 

Regulations section 1.901-1(c)(3).

You may make an election to claim a credit or to change 

from claiming a deduction to claiming a credit at any time 

before the end of a special 10-year limitation period 

described in section 6511(d)(3) (or section 6511(c) if the 

period is extended by agreement). You may make an election 

to claim a deduction or to change from claiming a credit to 

claiming a deduction at any time before the end of the 

standard 3-year limitation period described in section 

6511(a) (or section 6511(c) if the period is extended by 

agreement). See Regulations section 1.901-1(d) and Pub. 

514 for more information.

Foreign Taxes Eligible for a Credit

You can take a credit for income, war profits, and excess 

profits taxes paid or accrued during your tax year to any 

foreign country or U.S. possession, or any political 

subdivision (for example, city, state, or province) of the 

country or possession. This includes taxes paid or accrued in 

lieu of a foreign or possession income, war profits, or excess 

profits tax that is otherwise generally imposed. For purposes 

of the credit, U.S. possessions include Puerto Rico, the U.S. 

Virgin Islands, Guam, the Northern Mariana Islands, and 

American Samoa. See Pub. 514 for more information on what 

foreign taxes qualify for the credit.

U.S. citizens living in certain treaty countries may be able 

to take an additional foreign tax credit for foreign tax imposed 

on certain items of income from the United States. See Tax 

Treaties in Pub. 514 for details. If this applies to you, use the 

worksheet near the end of Pub. 514 to help you figure this 

additional credit.

2 Instructions for Form 1116 (2023)
If you make the election under section 962 to be taxed at 

corporate rates on the amount you must include in gross 

income under sections 951(a) and 951A(a) from your 

controlled foreign corporations (CFCs), you can claim the 

credit based on your share of foreign taxes paid or accrued 

by the CFC. If you make this election, you must claim the 

credit by filing Form 1118. You must also still file Form 1116 

to claim the credit for other foreign taxes you paid or 

accrued. For more information on how to complete your 

Form 1116 and Form 1118 when making this election, see 

sections 960 and 962 and Pub. 514.

Foreign Taxes Not Eligible for a Credit

You can't take a credit for the following foreign taxes.

1. Taxes paid to a foreign country that you don't legally 

owe, including amounts eligible for refund by the foreign 

country. If you don't exercise your available remedies to 

reduce the amount of foreign tax to what you legally owe, a 

credit for the excess amount isn't allowed. The amount of tax 

actually withheld by a foreign country isn't necessarily 100% 

creditable. See Regulations section 1.901-2(e)(2)(i).

Example. Country X withholds $25 of tax from a payment 

made to you. Under the income tax treaty between the United 

States and Country X, you owe only $15 and can claim a 

refund from Country X for the other $10. Only $15 is eligible 

for the foreign tax credit (whether or not you apply for a 

refund).

2. Taxes paid to a foreign country that are offset or 

reduced by a tax credit. This includes foreign taxes offset or 

reduced by a tax credit that is refundable to you in cash only 

if an excess credit remains after offsetting your foreign 

income tax liability as well as a tax credit purchased from 

another taxpayer. See Regulations section 1.901-2(e)(2)(ii). 

However, if the foreign income taxes are offset or reduced by 

a tax credit that is fully refundable to you in cash at your 

option, without having to first offset your foreign income tax 

liability, you can claim a foreign tax credit against your U.S. 

income tax for those foreign taxes. See Regulations section 

1.901-2(e)(2)(iii).

3. Taxes imposed by a foreign country only because you 

could claim a foreign tax credit against the U.S. tax liability for 

such foreign income taxes paid or accrued.

4. Taxes imposed by and paid to certain foreign 

countries. These countries are those designated by the 

Secretary of State as countries that repeatedly provide 

support for acts of international terrorism, countries with 

which the United States doesn't have or doesn't conduct 

diplomatic relations, or countries whose governments aren't 

recognized by the United States and aren't otherwise eligible 

to purchase defense articles or services under the Arms 

Export Control Act. Pub. 514 contains a list of these 

countries.

5. Foreign taxes withheld on a dividend from a 

corporation, if you haven't held the stock for at least 16 days 

within the 31-day period that begins 15 days before the 

ex-dividend date. This required holding period is greater for 

preferred-stock dividends attributable to periods totaling 

more than 366 days. See section 901(k)(3) or Pub. 514.

6. Foreign taxes withheld on a dividend to the extent that 

you have to make related payments on positions in 

substantially similar or related property.

Example. You receive a dividend subject to foreign 

withholding tax. You are obligated to pay someone else an 

amount equal to all these dividends you receive. You can't 

claim a foreign tax credit for the withholding tax on these 

dividends.

7. Foreign taxes withheld on income or gain (other than 

dividends) from property if you haven't held the property for at 

least 16 days within the 31-day period that begins 15 days 

before the date on which the right to receive the payment 

arises. See section 901(l) or Pub. 514.

8. Foreign taxes withheld on income or gain (other than 

dividends) from property to the extent you have to make 

related payments on positions in substantially similar or 

related property.

9. Foreign taxes that are used to provide, directly or 

indirectly, a subsidy to you, a person or business related to 

you, or any party transacting with you.

10. Taxes paid or accrued to a foreign country in 

connection with the purchase or sale of oil or gas extracted in 

that country if you don't have an economic interest in the oil 

or gas, and the purchase price or sales price is different from 

the fair market value of the oil or gas at the time of the 

purchase or sale.

11. Foreign taxes paid or accrued on income for which you 

are claiming an exclusion on Form 8873, Extraterritorial 

Income Exclusion. However, see section 943(d) for an 

exception for certain withholding taxes.

12. The disqualified portion of any foreign tax paid or 

accrued in connection with a covered asset acquisition. 

Covered asset acquisitions include certain acquisitions that 

result in a stepped-up basis for U.S. tax purposes. For more 

information, see section 901(m) and the regulations under 

that section, including Treasury Decision 9895, 2020-15 

I.R.B. 565, available at IRS.gov/irb/2020-15_IRB#TD-9895.

13. Foreign taxes disallowed under section 965(g) and 

Regulations section 1.965-5.

You can't take a credit for any interest or penalties you 

must pay.

For more information, see Foreign Taxes for Which You 

Cannot Take a Credit in Pub. 514.

Foreign Currency Conversion

Report all amounts in U.S. dollars except where specified 

otherwise in Part II. If you have to convert from foreign 

currency, attach a detailed explanation of how you figured the 

conversion rate.

If you take a credit for taxes paid, the conversion rate is the 

rate of exchange in effect on the day you paid the foreign 

taxes (or on the day the tax was withheld). If you receive a 

refund of foreign taxes paid, the conversion rate is the rate in 

effect when you paid the taxes, not when you receive the 

refund.

If you choose to account for foreign income taxes on an 

accrual basis, you must generally use the average exchange 

rate for the tax year to which the taxes relate. However, you 

can't do so if any of the following apply.

1. The foreign taxes are actually paid more than 2 years 

after the close of the tax year to which they relate.

2. The foreign taxes are actually paid in a tax year prior to 

the year to which they relate.

3. The foreign tax liability is denominated in any 

inflationary currency.

Accrued foreign taxes not eligible for conversion at the 

yearly average exchange rate must be converted using the 

Instructions for Form 1116 (2023) 3
exchange rate on the date of payment of the tax. However, 

accrued but unpaid foreign taxes denominated in inflationary 

currency must be translated into U.S. dollars using the 

exchange rate on the last day of the U.S. tax year to which 

those taxes relate.

Inflationary currency. Inflationary currency means the 

currency of a country in which there is cumulative inflation 

during the 36 calendar months immediately preceding the 

last day of the tax year of at least 30%, as determined by 

reference to the consumer price index of the country listed in 

the monthly issues of International Financial Statistics, or a 

successor publication, of the International Monetary Fund.

Election to use exchange rate on date paid. If you have 

accrued foreign taxes that you are otherwise required to 

convert using the average exchange rate, you can elect to 

use the exchange rate in effect on the date the foreign taxes 

are paid if the taxes are denominated in a nonfunctional 

foreign currency. If any of the accrued taxes are unpaid, you 

must translate them into U.S. dollars using the exchange rate 

on the last day of the U.S. tax year to which those taxes 

relate. Once made, the election applies to the tax year for 

which made and all subsequent tax years unless revoked 

with the consent of the IRS. It must be made by the due date 

(including extensions) for filing the tax return for the first tax 

year to which the election applies. Make the election by 

attaching a statement to the applicable tax return.

Special rules for a qualified business unit (QBU). If you 

have a QBU, see Pub. 514 for special rules for converting 

foreign income and taxes into U.S. dollars. You may have a 

QBU if you own and operate a business or are self-employed 

in a foreign country.

Foreign Tax Redeterminations

If you claim a credit for foreign taxes paid, and you receive a 

refund of all or part of those taxes in a later year, you must file 

an amended return reducing the taxes credited by the 

amount refunded.

If you claim the foreign tax credit based on foreign taxes 

accrued instead of foreign taxes paid, your foreign tax credit 

and U.S. tax liability must be redetermined in any of the 

following situations (foreign tax redeterminations).

1. Your accrued taxes when paid differ from the amount 

you claimed as a credit (including corrections to accrued tax 

amounts to reflect final foreign tax liability and additional tax 

you pay after the close of the tax year to which the tax 

relates).

2. You don't pay the accrued taxes within 24 months after 

the close of the tax year to which they relate.

If this applies to you, you must reduce the credit previously 

claimed by the amount of the unpaid taxes. You won't be 

allowed a credit for the unpaid taxes until you pay them. 

When you later pay the accrued taxes, a new tax 

redetermination occurs and you must translate the taxes into 

U.S. dollars using the exchange rate as of the date they were 

paid. The foreign tax credit is allowed for the year to which 

the foreign tax relates. See Foreign Currency Conversion, 

earlier.

3. After you pay the accrued taxes, you receive a full or 

partial refund of them.

4. You change your election and claim a foreign tax credit 

for foreign income taxes that you previously deducted, or you 

change your election and claim a deduction for foreign 

income taxes that you previously credited.

5. There is a change in foreign tax liability that affects the 

amount of distributions or inclusions under section 951, 

951A, or 1293, or affects the application of the high-tax 

exception described in section 954(b)(4).

6. For taxes taken into account when accrued but 

translated into dollars on the date of payment, the dollar 

value of the accrued tax differs from the dollar value of the tax 

paid because of fluctuations in the exchange rate between 

the date of accrual and the date of payment. However, no 

redetermination is required if the change in foreign tax liability 

for each foreign country is solely attributable to exchange rate 

fluctuation and is less than the smaller of:

a. $10,000, or

b. 2% of the total dollar amount of the foreign tax initially 

accrued for that foreign country for the U.S. tax year.

In this case, you must adjust your U.S. tax in the tax year in 

which the accrued foreign taxes are paid.

Reporting requirements. If any of the above foreign tax 

redeterminations occur after you file your tax return, and the 

foreign tax redeterminations change the amount of U.S. tax 

due for any tax year, you must generally file Form 1040-X, 

Amended U.S. Individual Income Tax Return, or other 

amended return, to notify the IRS so that your U.S. tax for the 

year or years affected can be redetermined. If you have a 

foreign tax redetermination that results in an increase in your 

U.S. tax liability for any year, note in the explanation of 

changes section of your amended tax return (for example, 

Form 1040-X, Part II), “This amended return and Form 1116 

are for a change in foreign tax credit that increases U.S. tax 

liability.” Complete and attach to Form 1040-X (or other 

amended return) a revised Form 1116 for the tax year(s) 

affected and a statement that contains information sufficient 

for the IRS to redetermine your U.S. tax liability. In some 

cases, you may not have to file Form 1040-X or attach Form 

1116. See Pub. 514 for more information, including 

exceptions. An increase in your U.S. tax liability as a result of 

a foreign tax redetermination is excepted from the general 

statute of limitations against assessment and collection. See 

sections 6501(c)(5) and 905(c).

Schedule C (Form 1116). In addition to filing an amended 

return with Form 1116 and attached statement for your tax 

year(s) for which your U.S. tax liability is changed as a result 

of the foreign tax redetermination, you must file Schedule C 

(Form 1116) with your current year tax return summarizing 

the foreign tax redeterminations that occurred that year that 

relate to prior tax years. You must file Schedule C (Form 

1116) for each applicable separate category of income.

If a foreign tax redetermination doesn't change the amount 

of U.S. tax due for any tax year, you don't need to file an 

amended return and may instead notify the IRS of the 

redetermination by attaching for each applicable separate 

category of income a completed Schedule C (Form 1116) to 

the original return for your tax year in which the foreign tax 

redetermination occurs. See the Instructions for Schedule C 

(Form 1116) for additional information.

Contested foreign income tax liability. In general, you 

can’t claim a credit for a contested foreign income tax liability 

until the contest is resolved and the amount of the liability is 

finally determined.

If you use the cash method of accounting, you can’t claim 

a credit for a contested foreign income tax liability (or any 

portion of it) that has been remitted to the foreign country 

until the contest is resolved and the tax is considered paid for 

4 Instructions for Form 1116 (2023)
purposes of section 901. You can claim a credit once the 

contest is resolved and the foreign income tax liability is 

finally determined. The tax is considered paid in the tax year 

in which the payment was made. See Regulations section 

1.905-1(c)(2). Alternatively, you can elect to claim a 

provisional credit for contested taxes, as described later.

If you elected the accrual method of accounting for 

claiming the foreign tax credit (see Part II—Foreign Taxes 

Paid or Accrued, under Specific Instructions, later), you can’t 

claim a credit for a contested foreign income tax liability (or 

any portion of it) that has been remitted to the foreign country 

until the contest is resolved and the tax is considered paid for 

purposes of section 901. You can claim a credit once the 

contest is resolved and the foreign income tax liability is 

finally determined and paid. The tax is considered to accrue 

in the foreign tax year to which the contested foreign income 

tax liability is related (“relation-back year”). See Regulations 

section 1.905-1(d)(3). Alternatively, you can elect to claim a 

provisional credit for contested taxes. See the next paragraph 

for details.

Election to claim a provisional credit for contested taxes. If you use the cash method of accounting, you may elect 

to claim a credit for a contested foreign income tax liability (or 

any portion of it) in the tax year you pay the contested 

amount (or any portion of it) to the foreign country, even 

though the liability isn’t finally determined and isn’t 

considered an amount of tax paid for purposes of section 

901. This election is available only for contested foreign 

income taxes that are paid in a tax year in which you elected 

to claim a credit under section 901(a), instead of a deduction 

under section 164(a)(3), for foreign income taxes that accrue 

or are paid in that year. To make the election, you must file 

Form 1116 for the tax year the contested liability is paid and 

Form 7204. In addition, for each subsequent tax year up to 

and including the tax year in which the contest is resolved, 

you must annually file Schedule C (Form 1116). Any portion 

of a contested foreign income tax liability for which a 

provisional credit is claimed that is subsequently refunded by 

the foreign country is a foreign tax redetermination under 

Regulations section 1.905-3(a).

If you are an accrual basis taxpayer or if you elected to 

claim your foreign tax credit on an accrual basis, you may 

elect to claim a credit for a contested foreign income tax 

liability (or any portion of it) in the relation-back year when the 

contested amount (or a portion of it) is paid to the foreign 

country, even though the liability isn’t finally determined and 

hasn’t accrued. This election is available only for contested 

foreign income taxes that relate to a tax year in which you 

elected to claim a credit under section 901(a), instead of a 

deduction under section 164(a)(3), for foreign income taxes 

that accrue or are paid in that year. To make the election, you 

must file Form 1116 and Form 7204 with your return (typically 

an amended return) for the tax year to which the contested 

tax relates. In addition, for each subsequent tax year up to 

and including the tax year in which the contest is resolved, 

you must annually file Schedule C (Form 1116). Any portion 

of a contested foreign income tax liability for which a 

provisional credit is claimed that is subsequently refunded by 

the foreign country is a foreign tax redetermination under 

Regulations section 1.905-3(a).

If you don't notify the IRS of a foreign tax refund or 

change in the dollar amount of foreign taxes paid or 

accrued, you will have to pay a penalty unless you 

can show that the failure to notify the IRS is due to 

reasonable cause and not due to willful neglect.

Income From Sources Outside the

United States

Foreign source income generally includes, but isn't limited to, 

the following.

• Compensation for services performed outside the United 

States.

• Interest income from a payer located outside the United 

States.

• Dividends from a corporation incorporated outside the 

United States.

• Subpart F income inclusions and section 951A category 

income inclusions.

• Gain on the sale of nondepreciable personal property you 

sold while maintaining a tax home outside the United States, 

if you paid a tax of at least 10% of the gain to a foreign 

country.

Foreign source income generally doesn't include gain 

realized on the sale or exchange of personal property by a 

U.S. resident, as defined in section 865(g).

Special rules apply in determining the source of income 

from the sale of inventory; sale of depreciable property used 

in a trade or business; sale of intangible property such as a 

patent, copyright, or trademark; and transportation services 

that begin or end in the United States or a U.S. possession. 

See Pub. 514 for more information.

Compensation for labor or personal services as an employee. If you are an employee and receive compensation 

for labor or personal services performed both inside and 

outside the United States, special rules apply in determining 

the source of the compensation. Compensation (other than 

fringe benefits) is sourced on a time basis. Fringe benefits 

(such as housing and education) are sourced on a 

geographical basis. Or you may be able to use an alternative 

basis to determine the source. If you use an alternative basis, 

you may have to check the box on line 1b (discussed later). 

See Pub. 514 for more information.

Categories of Income

Use a separate Form 1116 to figure the credit for each 

category of foreign source income listed above Part I of Form 

1116. The following instructions tell you what kind of income 

to include in each category. For more information, see Pub. 

514, section 904, and Regulations sections 1.904-4 and 

1.904-5.

a. Section 951A Category Income

Section 951A category income includes any amount included 

in gross income under section 951A (other than passive 

category income). Section 951A category income is 

otherwise referred to as “global intangible low-taxed income 

(GILTI)” and is included by U.S. shareholders of certain 

CFCs. See Pub. 514 for additional details.

b. Foreign Branch Category Income

Foreign branch category income consists of the business 

profits of U.S. persons that are attributable to one or more 

qualified business units (QBUs) in one or more foreign 

countries. Foreign branch category income doesn’t include 

CAUTION

!

Instructions for Form 1116 (2023) 5
any passive category income. See Pub. 514 for further 

information.

c. Passive Category Income

Passive category income consists of passive income and 

specified passive category income.

Passive category income doesn't include gain from the 

sale of inventory or property held primarily for sale to 

customers in the ordinary course of your trade or business; 

gain from commodities hedging transactions; and active 

business gains or losses of producers, processors, 

merchants, or handlers of commodities. It may also not 

include dividends, interest, rents, or royalties received from a 

CFC in which you are a U.S. shareholder who owns 10% or 

more of the total voting power or the total value of all classes 

of the corporation's stock.

Passive income. Passive income generally includes 

dividends, interest, royalties, rents, annuities, excess of gains 

over losses from the sale of property that produces such 

income or of non-income-producing investment property, and 

excess of gains over losses from foreign currency or 

commodities transactions. Capital gains not related to the 

active conduct of a trade or business are also generally 

passive income.

Passive income doesn't include export financing interest, 

active business rents and royalties, or high-taxed income. 

High-taxed income is income if the foreign taxes you paid on 

the income (after allocation of expenses) exceed the highest 

U.S. tax that can be imposed on the income.

Passive income also doesn't include financial services 

income derived by a financial services entity. You are a 

financial services entity if you are predominantly engaged in 

the active conduct of a banking, insurance, financing, or 

similar business for the tax year. Financial services income of 

a financial services entity generally includes income derived 

in the active conduct of a banking, financing, insurance, or 

similar business. If you qualify as a financial services entity 

because you treat certain items of income as active financing 

income under Regulations section 1.904-4(e)(2)(i)(Y), you 

must show the type and amount of each item on an 

attachment to Form 1116.

Specified passive category income. Dividends from a 

domestic international sales corporation (DISC) or former 

DISC to the extent they are treated as foreign source income, 

and certain distributions from a former foreign sales 

corporation (FSC) are specified passive category income.

d. General Category Income

General category income is income that isn't section 951A 

category income, foreign branch category income, passive 

category income, or income described in categories e, f, and 

g, discussed later. General category income may include the 

following.

• Wages, salary, and overseas allowances of an individual 

as an employee.

• Income earned in the active conduct of a trade or 

business.

• Gains from the sale of inventory or depreciable property 

used in a trade or business. See Pub. 514 for additional 

details.

e. Section 901(j) Income

No credit is allowed for foreign taxes imposed by and paid or 

accrued to certain sanctioned countries. However, income 

derived from each sanctioned country is subject to a 

separate foreign tax credit limitation. Therefore, you must use 

a separate Form 1116 for income derived from each 

sanctioned country. Because no credit is allowed for taxes 

paid to sanctioned countries, you would generally complete 

Form 1116 for this category only through line 17.

Note. A foreign tax credit may be claimed for foreign taxes 

paid or accrued with respect to section 901(j) income if such 

tax is paid or accrued to a country other than a sanctioned 

country. For example, if a U.S. citizen resident in a 

non-sanctioned country pays a residence-based income tax 

in that country on income derived from business activities in a 

sanctioned country, those foreign taxes would be eligible for 

a foreign tax credit. In this situation, you would continue 

completing Form 1116 and not stop at line 17.

Sanctioned countries are those designated by the 

Secretary of State as countries that repeatedly provide 

support for acts of international terrorism, countries with 

which the United States doesn't have or doesn't conduct 

diplomatic relations, or countries whose governments aren't 

recognized by the United States and aren't otherwise eligible 

to purchase defense articles or services under the Arms 

Export Control Act. Pub. 514 contains a list of these 

countries.

If you paid taxes to a country that ceased to be a 

sanctioned country during the tax year, see Pub. 514 for 

details on how to figure the foreign tax credit for the period 

that begins after the end of the sanctions.

Presidential waiver. The President of the United States has 

the authority to waive the denial of the credit with respect to a 

sanctioned country if:

• The waiver is in the national interest of the United States 

and will expand trade and investment opportunities for U.S. 

companies in the sanctioned country; and

• The President reports to Congress, not less than 30 days 

before the waiver is granted, the intention to grant the waiver 

and the reason for the waiver.

f. Certain Income Re-Sourced by Treaty

If a sourcing rule in an applicable income tax treaty treats 

U.S. source income as foreign source, and you elect to apply 

the treaty, the income will be treated as foreign source.

Important: You must compute a separate foreign tax credit 

limitation for any income for which you claim benefits under a 

treaty, using a separate Form 1116 for each amount of 

re-sourced income from a treaty country. This rule doesn’t 

apply to income that is re-sourced by reason of the relief from 

double taxation rules in any U.S. income tax treaty that is 

solely applicable to U.S. citizens who are residents of the 

foreign treaty country. See sections 865(h), 904(d)(6), and 

904(h)(10) and the regulations under those sections 

(including 1.904-4(k)) for any grouping rules and other 

exceptions. Add the amounts from line 24 of each separate 

Form 1116 and enter the total on line 30 of your summary 

Form 1116 (that is, the Form 1116 for which you are 

completing Part IV). In addition, you may be required to file 

Form 8833, Treaty-Based Return Position Disclosure Under 

Section 6114 or 7701(b), for the re-sourced income.

g. Lump-Sum Distributions

You can take a foreign tax credit for taxes you paid or accrued 

on a foreign source lump-sum distribution from a pension 

plan. Special formulas may be used to figure a separate tax 

6 Instructions for Form 1116 (2023)
on a qualified lump-sum distribution for the year in which the 

distribution is received. See Pub. 575 for more information.

If you are able to elect, and do elect, to figure your U.S. tax 

on a lump-sum distribution using Form 4972, Tax on 

Lump-Sum Distributions, a separate foreign tax credit 

limitation applies. Use a separate Form 1116. On this 

separate Form 1116, check box g above Part I. Skip Part I. 

Complete Part II showing only foreign taxes that are 

attributable to the lump-sum distribution. Then, complete the 

Worksheet for Lump-Sum Distributions to figure the amounts 

to enter in Part III.

Special Rules

Look-Through Rules

Certain income received or accrued by you as a 

10%-or-more U.S. shareholder in a CFC is treated as income 

in one of the separate categories listed under Categories of 

Income, earlier. For example, subpart F inclusions, dividends, 

interest, rents, and royalties from a CFC are only treated as 

passive category income to the extent they are attributable to 

passive category income of the CFC. See Regulations 

section 1.904-5 for more information.

Reporting Foreign Tax Information From 

Partnerships and S Corporations

If you received a Schedule K-3 from a partnership or S 

corporation that includes foreign tax information, use the 

rules below to report that information on Form 1116.

Note. In 2023, the partnership or S corporation may be 

excepted from providing Schedule K-3 to you if the 

partnership or S corporation has limited foreign activity. You 

still have the right to request Schedule K-3 and it may provide 

information that can increase your foreign tax credit. See the 

partnership and S corporation instructions for Form 1065 and 

Form 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.

General Information for Partners and S 

Corporation Shareholders

Less-than-10% limited partners. If you are a limited 

partner and you own a less-than-10% interest (by value) in 

the partnership, you must generally categorize your 

distributive share of foreign source income and deductions 

from that partnership as passive income. See the Partner’s 

Instructions for Schedule K-3 (Form 1065) and Regulations 

section 1.904-4(n) for more details and exceptions.

Reporting amounts on Form 1116. Include amounts 

reported to you on Schedule K-3 with any other amounts 

reportable on Form 1116 using:

• A separate Form 1116 for each category of income, and

• A separate column in Part I and a separate line in Part II for 

each country or possession.

Note. For any item that isn't reported by country on 

Schedule K-3, you may use any reasonable method to 

allocate it between countries or possessions on Form 1116.

Explanation of Certain Line Items on Schedule K-3 

for Forms 1065, 1120-S, and 8865

Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, 

Section 1, columns (b) through (e)—Foreign gross income sourced at partnership or S corporation level. 

Income reported in these columns has already been sourced 

for you by the partnership or S corporation. The partnership 

or S corporation has reported this income to you by country 

and by category of income. Include these amounts in Part I of 

each of the applicable Forms 1116 (that is, a separate Form 

1116 for each category of income you received). See the 

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, column (f)—Gross income sourced by partner or shareholder. This column includes income from the 

sale of eligible personal property (most personal property 

other than inventory, depreciable property, and certain 

intangible property). See Pub. 514 for details. You must first 

determine (using the rules described next) whether the 

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.

CAUTION

!

Don't include the amount on line 5 above in the tax you enter on line 20 of any other 

Form 1116 you are filing.

6. Multiply line 5 by line 4. Enter the result here and on Form 1116, line 21 ........................ 6.

7. Enter the smaller of line 1 or line 6 here and on Form 1116, line 24. To the left of line 24, enter 

“LSD” ............................................................................... 7.

Instructions for Form 1116 (2023) 7
income in this column is U.S. source income or foreign 

source income. Then, only enter the foreign source income in 

Part I of each of the applicable Forms 1116 (that is, a 

separate Form 1116 for each category of income you 

received).

Use the following rules to source the income reported to 

you in this column of Schedule K-3. If you are a U.S. resident 

(as defined next), the income is U.S. source income. If you 

are a nonresident (as defined later), the income is foreign 

source income. See the partner and shareholder instructions 

for Forms 1065 and 1120-S, Schedule K-3, for 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 

nonresident alien who has a tax home in the United States.

Tax home. Generally, your tax home is the general area of 

your main place of business, employment, or post of duty, 

regardless of where you maintain your family home. Your tax 

home is the place where you are permanently or indefinitely 

engaged to work as an employee or self-employed individual. 

If you don't have a regular or main place of business because 

of the nature of your work, then your tax home is the place 

where you regularly live. If you don't fit either of these 

categories, you are considered an itinerant and your tax 

home is wherever you work.

Nonresident. A nonresident is any person who isn't a U.S. 

resident. U.S. citizens and resident aliens with a foreign tax 

home won't be treated as nonresidents for a sale of eligible 

personal property unless a foreign tax of 10% or more was 

paid or accrued on the gain on the sale (or, in the case of a 

loss sale, a foreign tax of 10% or more would have been paid 

had the sale resulted in a gain).

Note. To help you with these rules, the partnership or S 

corporation has specifically identified the following on an 

attachment to Form 1065, 1120-S, or 8865. See 

Schedule K-3, Part I, box 1.

• Gains on the sale of eligible personal property for which a 

foreign tax of 10% or more was paid or accrued.

• Losses on the sale of eligible personal property for which a 

foreign tax of 10% or more would have been paid had the 

sale resulted in a gain.

Include foreign source income in Part I of the applicable 

Form 1116 (that is, the Form 1116 for the applicable category 

of income). Don't include in Part I of Form 1116 income that 

you determined (using these rules) to be U.S. source income.

If the partnership or S corporation has specifically 

identified any capital gains or losses or unrecaptured 

section 1250 gain on Schedule K-3, Part II, Section 1, 

line 8, or lines 11 through 15, and you have determined that 

those gains or losses are foreign source, see Foreign 

Qualified Dividends and Capital Gains (Losses), later, before 

entering an amount in Part I of Form 1116. See the 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. 

Combine your distributive share of “Total gross income” from 

Schedule K-3 with all of your other gross income and enter 

the total on line 3e. Note that you must include the total for all 

countries in each column of line 3e. “Gross income from all 

sources” is a constant amount (that is, you will enter the 

same amount on line 3e for each column of all Forms 1116 

that you file).

CAUTION

!

Forms 1065, 1120-S, and 8865, Schedule K-3, Part II, 

Section 2, lines 25 through 38, and 44 through 50, columns (b) through (e)—Deductions allocated and apportioned at partnership or S corporation level to foreign 

source income. The partnership or S corporation has 

already allocated these expenses to foreign source income 

and has reported them to you by category of income. Include 

these amounts on line 2 of each of the applicable Forms 

1116 (that is, a separate Form 1116 for each category of 

income you received). See the 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 2, lines 25 through 38, and 44 through 50, column (f)—Other expenses. These lines in column (f) 

include expenses (other than interest expense) of the 

partnership or S corporation that must be allocated and 

apportioned at the partner or shareholder level (for example, 

research and experimental (R&E) expenses on line 32).

Combine your distributive share of these expenses with all 

of your other like expenses, if any, and then allocate and 

apportion them using the applicable rules (for example, for 

R&E expenses, the rules under Regulations section 

1.861-17(f)).

Forms 1065, 1120-S, and 8865, Schedule K-3, Part III, 

Section 1, reports information you will need to allocate and 

apportion R&E expense. Forms 1065 and 8865, 

Schedule K-3, Part III, Section 3, reports information you will 

need to allocate and apportion the foreign-derived intangible 

income deduction to foreign source income in separate 

categories. Include expenses that you allocate to foreign 

source income on line 2 of the applicable Form 1116. 

Expenses that you allocate to U.S. source income shouldn't 

be entered on any line of Part I of Form 1116. See the 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 2, lines 39 through 43—Interest expense. See 

the instructions for line 4b, later, to allocate and apportion the 

interest expense shown on these lines of Schedule K-3. In 

applying those instructions, take into account your distributive 

share of the partnership's or S corporation's gross income 

(for purposes of the $5,000 threshold) or your pro rata share 

of the partnership's or S corporation's assets. See Forms 

1065, 1120-S, and 8865, Schedule K-3, Part III, Section 2, for 

the share of the partnership's or S corporation's assets. 

However, if you were a limited partner and your interest in the 

partnership was less than 10%, see the next paragraph. 

Include interest expense that you allocate to foreign source 

income on line 4b of the applicable Form 1116. Don't enter in 

Part I of Form 1116 any interest expense that you allocate to 

U.S. source income.

Less-than-10% limited partners. If you are a limited 

partner and you own (directly or indirectly) a less-than-10% 

interest (by income) in the partnership, you may generally 

allocate your distributive share of interest expense from that 

partnership to foreign or U.S. source income based on your 

distributive share of the gross foreign or U.S. source income 

of that partnership. The interest expense you allocate to 

foreign source income may generally be apportioned 

exclusively to passive category income. However, see 

Temporary Regulations section 1.861-9T(e)(4) for 

exceptions. See the Partner’s Instructions for Schedule K-3 

(Form 1065) for further information.

8 Instructions for Form 1116 (2023)
Forms 1065 and 8865, Schedule K-3, Part III, Section 4, 

line 1; and Form 1120-S, Schedule K-3, Part III, Section 

3, line 1—Foreign taxes. The partnership or S corporation 

has already allocated and apportioned total foreign taxes for 

you and has reported them to you by country and by category 

of income. Include these amounts in Part II of each of the 

applicable Forms 1116 (that is, a separate Form 1116 for 

each category of income you received). See the partner and 

shareholder instructions for Forms 1065 and 1120-S, 

Schedule K-3, for further information.

Forms 1065 and 8865, Schedule K-3, Part III, Section 4, 

line 2; and Form 1120-S, Schedule K-3, Part III, Section 

3, line 2—Reduction of taxes. The partnership or S 

corporation has already apportioned the reduction in taxes 

available for credit and has reported it to you by category of 

income. Include these amounts on line 12 of each of the 

applicable Forms 1116 (that is, a separate Form 1116 for 

each category of income you received). See the partner and 

shareholder instructions for Forms 1065 and 1120-S, 

Schedule K-3, for further information.

Forms 1065 and 8865, Schedule K-3, Part III, Section 4, 

line 3; and Form 1120-S, Schedule K-3, Part III, Section 

3, line 3—Foreign tax redeterminations. The partnership 

or S corporation has already apportioned the change in 

foreign income tax liability and has reported it to you by 

country and by category of income. Include these amounts 

on each of the applicable Schedules C (Form 1116) (that is, a 

separate Schedule C (Form 1116) for each category of 

income you received). See the partner and shareholder 

instructions for Forms 1065 and 1120-S, Schedule K-3, for 

further information.

Note. See the partner and shareholder instructions for 

Forms 1065 and 1120-S, Schedule K-3, Parts I, II, and III, for 

information related to foreign oil and gas taxes, high-taxed 

income, partner loan transactions, foreign tax 

redeterminations, and other information that may be 

necessary to complete Form 1116.

Foreign Qualified Dividends and 

Capital Gains (Losses)

Qualified dividends are the amounts you entered on 

Form 1040, 1040-SR, or 1040-NR, line 3a.

If you have foreign source qualified dividends or foreign 

source capital gains (including any foreign source capital 

gain distributions) or losses, you may be required to make 

certain adjustments to those amounts before taking them into 

account on line 1a (gross income) or line 5 (losses).

If you completed the Qualified Dividends and Capital Gain 

Tax Worksheet in the Instructions for Form 1040, and aren't 

required to file Schedule D, see Qualified Dividends and 

Capital Gain Tax Worksheet (Individuals) next to determine 

the adjustments you may be required to make. If you 

completed the Qualified Dividends Tax Worksheet in the 

Instructions for Form 1041, see Qualified Dividends Tax 

Worksheet (Estates and Trusts), later, to determine the 

adjustments you may be required to make. If you are required 

to file Schedule D, see Schedule D Filers, later, to determine 

the adjustments you may be required to make.

You can elect not to make the adjustments to your 

qualified dividends and capital gains if you qualify for the 

adjustment exception. See Adjustment exception under 

TIP

Qualified Dividends and Capital Gain Tax Worksheet 

(Individuals), Qualified Dividends Tax Worksheet (Estates 

and Trusts), and Schedule D Filers, later.

Qualified Dividends and Capital Gain Tax 

Worksheet (Individuals)

If you completed the Qualified Dividends and Capital Gain 

Tax Worksheet in the Instructions for Form 1040 and you 

don't have to file Schedule D, you may have to adjust the 

amount of your foreign source qualified dividends and capital 

gain distributions.

You must adjust the amount of your foreign source 

qualified dividends and capital gain distributions if both of the 

following apply.

• Line 5 of the Qualified Dividends and Capital Gain Tax 

Worksheet is greater than zero.

• Line 23 of the Qualified Dividends and Capital Gain Tax 

Worksheet is less than line 24 of that worksheet.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your foreign source 

capital gain distributions and qualified dividends. You make 

this election by not adjusting these items. If you make this 

election, you must elect not to adjust any of your foreign 

source qualified dividends or capital gain distributions.

You qualify for the adjustment exception if you meet both 

of the following requirements.

1. Line 5 of the Qualified Dividends and Capital Gain Tax 

Worksheet doesn't exceed:

a. $364,200 if married filing jointly or qualifying surviving 

spouse,

b. $182,100 if married filing separately,

c. $182,100 if single, or

d. $182,100 if head of household.

2. The amount of your foreign source capital gain 

distributions, plus the amount of your foreign source qualified 

dividends, is less than $20,000.

If you are subject to the alternative minimum tax, see the 

special rules in Regulations section 1.904(b)-1(b)(3).

How to make adjustments. To adjust your foreign source 

qualified dividends or capital gain distributions, multiply your 

foreign source qualified dividends or capital gain distributions 

in each separate category by 0.4054 if the foreign source 

qualified dividends or capital gain distributions are taxed at a 

rate of 15%, and by 0.5405 if they are taxed at a 20% rate. 

Include the results on line 1a of the applicable Form 1116.

You adjust your foreign source qualified dividends or 

capital gain distributions taxed at the 0% rate by not 

including them on line 1a.

No adjustments required. If you aren't required to adjust 

the amount of your foreign source qualified dividends or 

capital gain distributions, or you qualify for the adjustment 

exception and elect not to adjust these items, include the 

amount of your foreign source qualified dividends and capital 

gain distributions in each separate category (without 

adjustment) on line 1a of the applicable Form 1116.

Qualified Dividends Tax Worksheet (Estates and 

Trusts)

If you completed the Qualified Dividends Tax Worksheet in 

the Instructions for Form 1041, you must adjust the amount of 

your foreign source qualified dividends if:

Instructions for Form 1116 (2023) 9
• Line 5 of the Qualified Dividends Tax Worksheet is greater 

than zero, and

• Line 21 of the Qualified Dividends Tax Worksheet is less 

than line 22 of that worksheet.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your foreign source 

qualified dividends. You make this election by not adjusting 

these dividends. If you make this election, you must elect not 

to adjust any of your foreign source qualified dividends.

See section 904(b) and the regulations issued under that 

Code section to determine if you qualify for the adjustment 

exception.

How to make adjustments. To adjust your foreign source 

qualified dividends, multiply your foreign source qualified 

dividends in each separate category by 0.4054 if the foreign 

source qualified dividends are taxed at a rate of 15%, and by 

0.5405 if they are taxed at a 20% rate. Include the results on 

line 1a.

You adjust your foreign source qualified dividends taxed at 

the 0% rate by not including them on line 1a.

Don't adjust the amount of any foreign source 

qualified dividends that you elected to include on 

Form 4952, line 4g.

No adjustment required. If you aren't required to make 

adjustments to your foreign source qualified dividends (or 

you qualify for the adjustment exception and you elected not 

to adjust these dividends), include your foreign source 

qualified dividends on line 1a of the applicable Form 1116 

without adjustment.

Schedule D Filers

Note. Throughout these instructions, references to 

Schedule D (Form 1041) are for estates and trusts only.

Adjustments to foreign qualified dividends. If you are 

required to file Schedule D (Form 1040), you must adjust the 

amount of your foreign source qualified dividends that you 

include on line 1a of Form 1116 if one of the following applies 

to you.

1. You figured your tax using the Qualified Dividends and 

Capital Gain Tax Worksheet in the Form 1040 instructions, 

line 5 of that worksheet is greater than zero, and line 23 of 

that worksheet is less than line 24.

2. You figured your tax using Schedule D (Form 1041), 

line 27 of Schedule D is greater than zero, and line 43 of 

Schedule D is less than line 44.

3. You figured your tax using the Schedule D Tax 

Worksheet (in the Schedule D (Form 1040) instructions), 

line 18 of the Schedule D Tax Worksheet is greater than zero, 

and line 45 of the Schedule D Tax Worksheet is less than 

line 46.

4. You figured your tax using the Schedule D Tax 

Worksheet (in the Schedule D (Form 1041) instructions), 

line 17a of the Schedule D Tax Worksheet is greater than 

zero, and line 42 of the Schedule D Tax Worksheet is less 

than line 43.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your foreign source 

qualified dividends. You make this election by not adjusting 

these dividends or your foreign capital gains (or losses). If 

you make this election, you must elect not to adjust any of 

your foreign source qualified dividends.

CAUTION

!

You qualify for the adjustment exception if you meet both 

of the following requirements.

1. Line 5 of the Qualified Dividends and Capital Gain Tax 

Worksheet in the Form 1040 instructions or line 18 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

instructions is less than or equal to:

a. $364,200 if married filing jointly or qualifying surviving 

spouse,

b. $182,100 if married filing separately,

c. $182,100 if single, or

d. $182,100 if head of household.

2. The amount of your foreign source net capital gain, 

plus the amount of your foreign source qualified dividends, is 

less than $20,000.

For trusts and estates, see section 904(b) and the 

regulations issued under that Code section to determine if 

you qualify for the adjustment exception.

If you are subject to the alternative minimum tax, see the 

special rules in Regulations section 1.904(b)-1(b)(3).

Note. Your foreign source net capital gain is the excess of 

your net long-term capital gain from foreign sources over your 

net short-term capital loss from foreign sources. Ignore any 

long-term capital gains you elected to include on Form 4952, 

line 4g, in determining your foreign source net capital gain. 

Ignore any qualified dividends you elected to include on Form 

4952, line 4g, in determining the amount of your foreign 

source qualified dividends.

How to make adjustments. To adjust your foreign source 

qualified dividends, multiply your foreign source qualified 

dividends in each separate category by 0.4054 if the foreign 

source qualified dividends are taxed at a rate of 15%, and by 

0.5405 if they are taxed at a 20% rate. Include the results on 

line 1a of the applicable Form 1116.

You adjust your foreign source qualified dividends taxed at 

the 0% rate by not including them on line 1a.

Don't adjust the amount of any foreign source 

qualified dividends that you elected to include on 

Form 4952, line 4g.

No adjustment required. If you aren't required to adjust 

your foreign source qualified dividends (or you qualify for the 

adjustment exception and elect not to adjust these 

dividends), include on line 1a of Form 1116 the full amount of 

foreign source qualified dividends without adjustment.

Adjustments to foreign capital gains and losses. You 

must use Worksheet A, Worksheet B, or the instructions 

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 

to use Worksheet A or Worksheet B. If you don't qualify to 

use Worksheet A or Worksheet B, use the instructions under 

Capital Gains and Losses in Pub. 514 to determine the 

adjustments you must make.

Before you complete Worksheet A or Worksheet B, 

you must reduce each foreign source long-term 

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 1a of the applicable Form 1116 without adjustment.

Worksheet A. You can use Worksheet A to determine the 

adjustments you must make to your foreign source capital 

gains or losses if you have foreign source capital gains or 

CAUTION

!

CAUTION

!

10 Instructions for Form 1116 (2023)
losses in no more than two separate categories and any of 

the following apply.

• You qualify for the adjustment exception discussed earlier 

under Adjustments to foreign qualified dividends under 

Schedule D Filers and you didn't make any adjustments to 

your foreign qualified dividends (if any).

• Line 15 or 16 of Schedule D (Form 1040) (line 18a or 19 of 

Schedule D (Form 1041)) is zero or a loss.

• You figured your tax using the Qualified Dividends and 

Capital Gain Tax Worksheet in the Form 1040 instructions 

and (a) line 3 of that worksheet is zero or less, (b) line 5 of 

that worksheet is zero, or (c) line 23 of that worksheet is 

equal to or greater than line 24.

• You figured your tax using Schedule D (Form 1041) and (a) 

line 27 of Schedule D is zero; (b) line 22 of Schedule D minus 

the amount on Form 4952, line 4e, that you elected to include 

on Form 4952, line 4g, is zero or less; or (c) line 43 is equal to 

or greater than line 44.

• You figured your tax using the Schedule D Tax Worksheet 

(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 

greater than line 46.

• You figured your tax using the Schedule D Tax Worksheet 

(in the Schedule D (Form 1041) instructions) and (a) line 17a 

is zero, (b) line 9 is zero or less, or (c) line 42 is equal to or 

greater than line 43.

Complete Worksheet A only once, even if you have capital 

gains or losses in two separate categories. Keep the 

completed Worksheet A for your records. Don't file 

Worksheet A with your tax return.

Capital losses are deductible only up to $3,000 ($1,500 if 

married filing separately) of ordinary income.

Worksheet B. If you don't qualify to use Worksheet A , use 

Worksheet B to determine the adjustments you must make to 

your foreign source capital gains or losses if:

• You have foreign source capital gains or losses in no more 

than two separate categories,

• You didn't complete the Unrecaptured Section 1250 Gain 

Worksheet or the 28% Rate Gain Worksheet in the 

Schedule D instructions, and

• You don't have any capital gains taxed at a rate of 0% or 

20%.

Complete Worksheet B only once, even if you have capital 

gains or losses in two separate categories. Keep the 

completed Worksheet B for your records. Don't file 

Worksheet B with your tax return.

Capital losses are deductible only up to $3,000 ($1,500 if 

married filing separately) of ordinary income.

Specific Instructions

Part I—Taxable Income or Loss From 

Sources Outside the United States

Part I must be completed by all filers unless 

specifically indicated otherwise in these instructions.

Line i—Foreign Country or U.S. Possession

Generally, if you received income from, or paid taxes to, more 

than one foreign country or U.S. possession, report 

information on a country-by-country basis on Form 1116, 

Parts I and II. Use a separate column in Part I and a separate 

line in Part II for each country or possession. If you paid taxes 

CAUTION

!

to more than three countries or possessions, attach 

additional sheets following the format of Parts I and II.

Foreign tax credit splitting event. If you had a foreign tax 

credit splitting event in a previous year and you are taking the 

related income into account in 2023, enter “909 income” on 

line i for that income instead of the country or possession 

name.

Section 863(b) gross income and deductions. You don't 

need to report section 863(b) income (certain income from 

services or inventory that is partly from U.S. source and partly 

from foreign source) on a per-country basis. Total all section 

863(b) foreign source income in the applicable category and 

enter the total in a single column in Part I. Enter “863(b)” on 

line i. Total all section 863(b) deductions in the applicable 

category and in the same column enter the totals on lines 2 

through 6. Total all foreign taxes imposed on section 863(b) 

income and enter the total on a single line in Part II for the 

applicable category.

Regulated investment company (RIC) pass-through 

amounts. You don't need to report income passed through 

from a mutual fund or other RIC on a country-by-country 

basis. Total all income, in the applicable category, passed 

through from the mutual fund or other RIC and enter the total 

in a single column in Part I. Enter “RIC” on line i. Total all 

foreign taxes passed through and enter the total on a single 

line in Part II for the applicable category.

Inclusions under section 951A. Because computations for 

inclusions under section 951A are reported on separate 

Forms 8992, U.S. Shareholder Calculation of Global 

Intangible Low-Taxed Income, you don't need to report those 

inclusions on a country-by-country basis. Enter the total 

inclusion in a single column in Part l and enter “951A” on line 

i.

High-taxed income. Passive income doesn't include 

high-taxed income. High-taxed income is income if the 

foreign taxes you paid on the income (after allocation of 

expenses) exceed the highest U.S. tax that can be imposed 

on the income. See Regulations section 1.904-4(c) for more 

information. If you have passive income that is high-taxed 

income, use a separate column in Part I. Enter “HTKO” on 

line i of Forms 1116 for passive category income and the 

other category of income to which such passive category 

income is reclassified. On your Form 1116 for passive 

category income, passive income that is treated as another 

category of income because it is high taxed should be 

included on line 1a in the column for the country entered on 

line i. Also, enter the high-taxed income in the “HTKO” 

column on line 1a as a negative number. On your Form 1116 

for the other category of income, the high-taxed income 

should be entered as a positive number on line 1a in the 

“HTKO” column. Don't enter any amounts on lines 2 through 

5 for your “HTKO” column. Add all deductions that are 

definitely related or apportioned to passive income that is 

treated as another category of income because it is high 

taxed and enter the total amount of those deductions on 

line 6 in the appropriate “HTKO” column. Enter the amount as 

a negative number in the “HTKO” column on your Form 1116 

for passive category income. Enter the amount as a positive 

number in the “HTKO” column on your Form 1116 for the 

other category of income. See the instructions for line 13, 

later.

Instructions for Form 1116 (2023) 11
Worksheet A (See instructions.) Keep for Your Records

Category #1 Category #2

Specify ▶

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

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

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

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

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

6. U.S. capital loss adjustment factor. (For each separate category, 

divide line 1 by line 2 and round off the result 

to at least four decimal places.) ........................... 6.

7. U.S. capital loss adjustment. (For each separate category, multiply 

line 4 by line 6.) ....................................... 7.

8. Adjusted separate category capital gain. (For each 

separate category, subtract line 7 from line 1. Enter 

the result here and include the result on line 1a of the 

applicable Form 1116.) ................................. 8.

Instructions for Worksheet A

Line 1. For each separate category for which you have foreign source capital gains or losses, combine your foreign source capital gains 

and losses in that separate category and enter the result on line 1. Show a loss on line 1 of this worksheet as a negative amount and include 

the loss on line 5 of the Form 1116 you are filing for that separate category. 

Line 2. Combine the amounts entered on line 1. If the result is zero or less, don't complete the rest of the worksheet. Instead, for each 

separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you are filing 

for that separate category.

Line 3. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form 4952, line 4g. If 

the result is zero or less, enter -0-. 

Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that Schedule D. If 

the result is zero or less, enter -0-.

Line 4. Subtract line 3 from line 2 and enter the result on line 4. If the result is zero or less, don't complete the rest of the worksheet. Instead, 

for each separate category with a positive amount on line 1 of this worksheet, include that positive amount on line 1a of the Form 1116 you 

are filing for that separate category. 

Line 5.

• If both separate categories have a positive amount on line 1, skip line 5 and go to line 6.

• If only one separate category has a positive amount on line 1, subtract line 4 from that positive amount. Enter the result here and include 

the result on line 1a of the Form 1116 you are filing for that separate category. Skip lines 6–8 of this worksheet.

12 Instructions for Form 1116 (2023)
Worksheet B (See instructions.) Keep for Your Records

Category #1

Specify ▶ ____________

Category #2

Specify ▶ __________

(1)

Short-Term

(2)

Long-Term

(15%)

(3)

Short-Term

(4)

Long-Term

(15%)

(5)

Other

1. Separate category rate 

group capital gain or (loss)

2. U.S. capital loss adjustment 

amount 

3. Subtotal (subtract line 2 from 

line 1 gain amounts)

4. Net U.S. long-term capital 

loss 

5. U.S. long-term capital loss 

adjustment

6. Excess net U.S. long-term 

capital loss

7. Long-term capital gain (or 

adjustment amount)

8. Limitation percentage

9. Long-term limitation amounts

10. Adjustment amounts

11. Rate differential adjustments

12. Long-term gains

13. Rate differential adjustment

14. Long-term gain

15. Adjusted separate category 

capital gains and losses

Instructions for Form 1116 (2023) 13
Instructions for Worksheet B

Line 1. For each separate category, combine the capital gains and losses as follows.

• Combine your foreign source short-term capital gains and losses and enter the result in column (1) or (3). 

• Combine your foreign source long-term capital gains and losses and enter the result in column (2) or (4).

Line 2. Complete the Line 2 Worksheet for each column on line 1 with a gain.

Line 4. Enter your net long-term capital loss (if any) from U.S. sources. To determine this amount, subtract your long-term 

capital losses from U.S. sources from your long-term capital gains from U.S. sources. Enter the loss (if any) as a positive 

amount in column (5). If you don't have a loss, leave line 4 blank and skip lines 5 through 14.

Line 5. Combine the amounts (if any) from columns (2) and (4) on line 2. Enter the result in column (5). If you don't have any 

amount entered in either column, enter -0- in column (5).

Line 6. Subtract line 5 from line 4. Enter the result in column (5). If the result is zero or less, leave line 6 blank and skip lines 7 

through 14 of this worksheet.

Line 7.

• If you entered an amount in either column (2) or (4) (but not both) of line 3, subtract line 6 from the amount entered in either 

column (2) or (4) of line 3. Enter the result in column (2) or (4) on line 7 and skip lines 8 through 12.

• If you entered amounts in both columns (2) and (4) on line 3, combine those amounts and enter the result in column (5) on 

line 7.

Line 8. Divide line 3, column (2), by line 7, column (5). Enter the result on line 8, column (2). Divide line 3, column (4), by 

line 7, column (5). Enter the result on line 8, column (4). Round off each result to at least four decimal places.

Line 9. Multiply each decimal amount on line 8 by line 6 and enter the results in the appropriate columns on line 9.

Line 10. Subtract line 9, column (2), from line 3, column (2), and enter the result on line 10, column (2). Subtract line 9, 

column (4), from line 3, column (4), and enter the result on line 10, column (4).

Line 11. Multiply each amount on line 10 by 0.4054 and enter the results here.

Line 12. Combine line 11, column (2), with line 9, column (2), and enter the result on line 12, column (2). Combine line 11, 

column (4), with line 9, column (4), and enter the result on line 12, column (4). Include the amounts on line 1a of the 

applicable Form 1116. Skip lines 13 and 14.

Line 13. Multiply the amount on line 7 by 0.4054 and enter the result here in the applicable column.

Line 14. Combine line 6 and line 13 and enter the result here. Include the result on line 1a of the applicable Form 1116.

Line 15.

If you have a:

• Short-term gain shown in column (1) or (3) of line 3, enter the amount of that short-term gain on line 15, column (1) or (3).

• Long-term gain shown in column (2) or (4) of line 3, and line 6 is blank, multiply the amount of each gain by 0.4054 and 

enter the result on line 15, column (2) or (4).

• Short-term loss in any column of line 1, complete the Line 15 Worksheet for each column with a loss.

• Long-term loss in column (2) or (4) of line 1, multiply the amount of the loss by 0.4054 and enter the result on line 15 in the 

appropriate column.

After you have completed line 15:

• Include line 15 gain amounts on line 1a of the applicable Form 1116, and 

• Include line 15 loss amounts on line 5 of the applicable Form 1116.

14 Instructions for Form 1116 (2023)
Line 2 Worksheet (For Line 2 of Worksheet B)

(See instructions below.) Keep for Your Records

Category #1 Category #2

Specify ▶

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

1. Separate category rate group 

 gain (or loss) ............... 1.

2. Separate category gain (or loss) 2.

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

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

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

6. Separate category 

adjustment ................. 6.

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

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

Instructions for Line 2 Worksheet

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

Line 2. For each separate category, combine the amounts from line 1. Enter a loss as a negative amount (in parentheses).

Line 3. Combine the amounts from line 2 of this worksheet. If the result is zero or less, stop here. Don't enter any amount on 

line 2 of Worksheet B.

Line 4. Enter the amount from line 16 of Schedule D (Form 1040), less the portion of net capital gain you included on Form 

4952, line 4g. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B. 

Instead, complete Worksheet A.

Estates and trusts: Enter the amount from line 19 of Schedule D (Form 1041), less any amount shown on line 25 of that 

Schedule D. If the amount entered on line 4 is zero or less, stop here. Don't continue with this worksheet or Worksheet B. 

Instead, complete Worksheet A.

Line 5. Subtract line 4 from line 3 and enter the result on line 5. If the result is zero or less, stop here. Don't enter any amount 

on line 2 of Worksheet B. 

Line 6.

• If only one separate category has a positive amount on line 2, enter the amount from line 5 on line 6 (in the column for the 

separate category with the positive amount on line 2).

• If both separate categories have positive amounts on line 2, divide each amount on line 2 by line 3. Multiply each result by 

line 5. Enter the results on line 6 in the appropriate columns.

Line 7.

For each separate category, the following rules apply.

• If you entered an amount on line 6 and you entered positive amounts in both the short-term and long-term columns on 

line 1, divide each positive amount on line 1 by line 2 and enter the results in the appropriate columns.

• Leave line 7 blank if you didn't enter an amount on line 6 or only one column on line 1 has a positive amount.

Line 8.

For each separate category, the following rules apply.

• If you entered amounts on line 7, multiply each amount on line 7 by line 6. Enter the results in the appropriate columns on 

line 8 of this worksheet and on line 2 of Worksheet B.

• If line 7 is blank, enter the amount from line 6 in the same column on line 8 as the column that has a gain on line 1. Also, 

enter the amount on line 2 of Worksheet B in the appropriate column. If line 6 is blank, don't enter any amount on line 8 of this 

worksheet or line 2 of Worksheet B.

Instructions for Form 1116 (2023) 15
Line 15 Worksheet (For Line 15 of Worksheet B) Keep for Your Records

1. Enter your net short-term capital gain (if any) from U.S. sources. To determine this amount, subtract your 

short-term capital losses from U.S. sources from your short-term capital gains from U.S. sources. If the result is 

zero or a loss, enter -0- ........................................................................ 1.

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

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

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

categories? 

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

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

5. Enter the short-term capital loss from line 1 of Worksheet B (enter the loss as a positive amount) ........ 5.

6. Enter the gain, if any, determined on line 3. If line 3 isn't a gain, enter -0- ................................ 6.

7. Subtract line 6 from line 5. If zero or a loss, enter -0- ................................................. 7.

8. Multiply line 7 by 0.4054 ....................................................................... 8.

9. Enter the smaller of line 5 or line 6 ............................................................... 9.

10. Add lines 8 and 9. Enter the result here and on line 15 of Worksheet B .................................. 10.

11. Is the amount on line 1 zero?

Yes. Multiply each short-term loss by 0.4054. Enter the results on line 15 of Worksheet 

B. Skip the rest of this worksheet.

No. Go to line 12.

12. Enter your short-term loss from Worksheet B, line 1, column (1) (enter the loss as a positive 

amount) .................................................................................... 12.

13. Enter your short-term loss from Worksheet B, line 1, column (3) (enter the loss as a positive 

amount) .................................................................................... 13.

14. Add lines 12 and 13 ........................................................................... 14.

15. Enter the gain determined in line 1 ............................................................... 15.

16. Subtract line 15 from line 14 .................................................................... 16.

Is the result zero or less?

Yes. Skip the rest of this worksheet. Enter each short-term loss from line 1 on line 15 of 

Worksheet B, in the applicable column, without adjustment (that is, each short-term 

loss you enter on line 15 of Worksheet B will be the same as the short-term loss 

you entered on line 1 of Worksheet B).

No. Complete lines 17–22.

17. Multiply line 16 by 0.4054 ...................................................................... 17.

18. Add lines 15 and 17 ........................................................................... 18.

19. Divide line 12 by line 14 ........................................................................ 19.

20. Multiply line 19 by line 18. Enter the result here and on Worksheet B, line 15, column (1) .................. 20.

21. Divide line 13 by line 14 ....................................................................... 21.

22. Multiply line 21 by line 18. Enter the result here and on Worksheet B, line 15, column (3) ................... 22.

16 Instructions for Form 1116 (2023)
Lines 1a and 1b—Foreign Gross Income

Include income in the category checked above Part I that is 

taxable by the United States and is from sources within the 

country entered on line i. You must include income even if it 

isn't taxable by that foreign country. Identify the type of 

income on the dotted line next to line 1a. Don't include any 

earned income excluded on Form 2555, Foreign Earned 

Income.

Example. If you received dividends (passive category 

income) and wages (general category income) from foreign 

sources, you must complete two Forms 1116. On one Form 

1116, check box c (passive category income), enter the 

dividends on line 1a, and enter “Dividends” on the dotted 

line. On the other Form 1116, check box d (general category 

income), enter on line 1a wages not excluded on Form 2555, 

and enter “Wages” on the dotted line. Complete Parts I, II, 

and III of each Form 1116. Then, complete Part IV on the 

Form 1116 with the larger amount entered on line 24.

If you are filing a Form 1116 that includes foreign 

source qualified dividends or foreign source capital 

gains or losses, see Foreign Qualified Dividends and 

Capital Gains (Losses), earlier.

Line 1b

You must check the box on line 1b if all of the following apply.

• The income on line 1a is compensation for services you 

performed as an employee.

• Your total employee compensation from both U.S. and 

foreign sources was $250,000 or more.

• You used an alternative basis (discussed in Pub. 514) to 

determine the source of the compensation entered on 

line 1a.

In addition, attach to Form 1116 a statement that contains 

the following information.

• Your name and social security number (written across the 

top of the statement).

• The specific compensation income or the specific fringe 

benefit for which the alternative basis is used.

• For each such item, the alternative basis of allocation of 

source used.

• For each such item, a computation showing how the 

alternative allocation was computed.

• A comparison of the dollar amount of the compensation 

sourced within and without the United States under both the 

alternative basis and the time or geographical basis for 

determining the source.

You must keep documentation showing why the alternative 

basis more properly determines the source of the 

compensation.

Lines 2 Through 5—Deductions and Losses

You must reduce your foreign gross income on line 1a by 

entering on lines 2 through 5:

• Any of your deductions that definitely relate to that foreign 

income; and

• A ratable share of your other deductions that don't 

definitely relate to that foreign income, any other foreign 

income, or U.S. source income.

If you don't itemize deductions, enter your standard 

deduction on line 3a, and don't enter on lines 2 through 5 any 

deductions that would have been reported on Schedule A 

CAUTION

!

(Form 1040). Don't include deductions and losses related to 

exempt or excluded income such as foreign earned income 

you have excluded on Form 2555 on lines 2 through 5.

Special rules apply to the allocation of research and 

experimental expenditures. See Regulations section 

1.861-17.

If the law of a U.S. state to which you pay income taxes 

doesn't specifically exempt foreign source income from tax, 

you may be required to make a special allocation of state 

taxes you paid. See Pub. 514 for more information.

The deduction for state and local taxes on 

Schedule A (Form 1040), lines 5a through 5c, is 

generally limited to $10,000 ($5,000 if married filing 

separately). Don't include more than this amount of state and 

local taxes on Form 1116, lines 2 and 3a.

Line 2

Enter your deductions that definitely relate to the gross 

income from foreign sources shown on line 1a. For example, 

if you are reporting foreign business income on line 1a, 

include on line 2 business expenses such as supplies and 

advertising incurred as part of operating the foreign business. 

Also include on line 2 state and local income taxes related to 

foreign source income. For more information, see Pub. 514 

and section 861 and the regulations under that section. 

Attach a statement listing the separate expenses included on 

line 2.

Don't include any interest expense on line 2. See lines 4a 

and 4b for special rules for interest expense.

Lines 3a and 3b

Some deductions don't definitely relate to either your foreign 

source income or your U.S. source income. Enter on lines 3a 

and 3b any deductions (other than interest expense) that:

• Aren't shown on line 2, and

• Aren't definitely related to your U.S. source income.

Line 3a. Include the following itemized deductions (from 

Schedule A (Form 1040)) on line 3a.

• Medical expenses (line 4).

• General sales taxes.

• Real estate taxes for your home.

• State and local personal property taxes.

If you don't itemize deductions, enter your standard 

deduction on line 3a.

Line 3b. Enter on line 3b any other deductions that don't 

definitely relate to any specific type of income (for example, 

deductions shown on Schedule 1 (Form 1040), Part II, 

Adjustments to Income).

Attach a statement listing the separate expenses included 

on lines 3a and 3b.

Lines 3d and 3e

For lines 3d and 3e, gross income means the total of your 

gross receipts (reduced by cost of goods sold), total capital 

and ordinary gains (before subtracting any losses), and all 

other income (before subtracting any deductions).

Line 3d. Enter your gross foreign source income from the 

category you checked above Part I of this Form 1116. Include 

CAUTION

!

Instructions for Form 1116 (2023) 17
any foreign earned income you have excluded on Form 2555 

but don't include any other exempt income.

If you had income from more than one country, you must 

enter income from only one country in each column.

If you had to adjust your foreign qualified dividends or 

capital gains (discussed earlier), include those amounts 

without regard to any adjustments.

Line 3e. Enter on line 3e in each column your gross income 

from all sources and all categories, both U.S. and foreign. 

"Gross income from all sources" is a constant amount (that is, 

you will enter the same amount on line 3e for each column of 

all Forms 1116 that you file). Include any foreign earned 

income you have excluded on Form 2555 but don't include 

any other exempt income.

If you are a nonresident alien, include on both lines 3d and 

3e your income that isn't effectively connected with a trade or 

business in the United States.

If you had to adjust your foreign qualified dividends or 

capital gains (discussed earlier), include those amounts 

without regard to any adjustments.

Line 3f

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, 

round off to 0.8757, not to 0.876 or 0.88). Enter the result, but 

don't enter more than “1.”

Line 4a

If your gross foreign source income (including income 

excluded on Form 2555) doesn't exceed $5,000, you can 

allocate all of your interest expense to U.S. source income. 

Otherwise, deductible home mortgage interest including 

points is apportioned using a gross income method. Use the 

Worksheet for Home Mortgage Interest to figure the amount 

to enter on line 4a.

Line 4b

Other interest expense includes investment interest, interest 

incurred in a trade or business, and passive activity interest. 

If you are a U.S. citizen, resident alien, or a domestic estate, 

and your gross foreign source income (including any income 

excluded on Form 2555) doesn't exceed $5,000, you can 

allocate all of your interest expense to U.S. source income. 

Otherwise, each type of interest expense is apportioned 

separately using an “asset method.” See Pub. 514 for more 

information.

Example. You have investment interest expense of 

$2,000. Your assets of $100,000 consist of stock generating 

U.S. source income (adjusted basis, $40,000) and stock 

generating foreign source income (adjusted basis, $60,000). 

You apportion 40% ($40,000/$100,000) of $2,000, or $800, 

of your investment interest to U.S. source income and 60% 

($60,000/$100,000) of $2,000, or $1,200, to foreign source 

income. In this example, you will enter the $1,200 

apportioned to foreign source income on line 4b. You 

wouldn't enter the $800 apportioned to U.S. source income 

on any line of Part I of Form 1116.

Line 5

If you have capital losses from foreign sources, see Foreign 

Qualified Dividends and Capital Gains (Losses), earlier, for 

information on adjustments you may be required to make.

Part II—Foreign Taxes Paid or 

Accrued

See General Instructions, earlier, for descriptions of 

foreign taxes that are eligible for the foreign tax credit 

and for foreign taxes that aren't eligible for the foreign 

tax credit.

Generally, you can take a foreign tax credit in the tax year 

you paid or accrued the foreign taxes, depending on your 

method of accounting. If you report on the cash basis, you 

can choose to take the credit for accrued taxes by checking 

the “Accrued” box in Part II on a timely filed original return. 

You can’t make this choice on an amended return. Once you 

choose to do this, you must credit foreign taxes in the year 

they accrue on all future returns.

Generally, you must enter in Part II the amount of foreign 

taxes, in both the foreign currency denomination(s) and as 

converted into U.S. dollars, that relate to the category of 

CAUTION

!

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.

18 Instructions for Form 1116 (2023)
income checked above Part I. Taxes are related to the 

income if the income is included in the foreign tax base on 

which the tax is imposed. If the foreign tax you paid or 

accrued relates to more than one category of income, 

apportion the tax among the categories. The apportionment 

is based on the ratio of net foreign taxable income in each 

category to the total net income subject to the foreign tax. 

See Allocation of Foreign Taxes in Pub. 514 for an example.

Enter in Part II the foreign taxes that were previously 

suspended under section 909 and that are allowed in 2023 

because the related income is taken into account in 2023. 

Enter “909 taxes” in column (l) instead of the date paid or 

accrued. Complete the other columns as appropriate.

If foreign tax paid on passive income is reported to 

you in U.S. dollars on a Form 1099-DIV, 1099-INT, or 

similar statement, you don't have to convert the 

amount shown into foreign currency. This rule applies 

whether or not you can make the election to claim the foreign 

tax credit without filing Form 1116 (as explained earlier). 

Enter “1099 taxes” in Part II, column (l), and complete 

columns (q) through (u) for each foreign country indicated in 

Part I.

Note. If you are taking a credit for additional taxes paid or 

accrued as the result of an audit by a foreign taxing authority 

or you are filing an amended return reflecting a foreign tax 

refund, attach a statement to Form 1116 identifying these 

taxes.

Part III—Figuring the Credit

Line 10

Enter the unused foreign taxes in the separate category from 

another tax year that are eligible to be carried forward to or 

back to 2023. The amount of foreign taxes carried forward to 

the current tax year is the amount from Schedule B (Form 

1116), line 3, column (xiv). Attach Schedule B (Form 1116) to 

your Form 1116 for each applicable separate category of 

income if you enter a carryover of foreign taxes from a prior 

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 

Schedule B (Form 1116) for 2023 if you carry back a foreign 

tax to 2023, and don't otherwise need to file Schedule B 

(Form 1116). See the Instructions for Schedule B (Form 

1116) for more information.

If you enter an amount on line 10 and you don't need 

to attach Schedule B, check the box on line 10.

You can carry back 1 year and then forward 10 years any 

foreign tax you paid or accrued to any foreign country or U.S. 

possession (reduced as described under Line 12, later) on 

income in a separate category that is more than the 

limitation. First, apply the excess to the earliest year to which 

it may be carried. Then, apply it to the next earliest year, and 

so on. The carryback-carryforward period can't be extended 

even if you are unable to take a credit in 1 of the intervening 

years.

Special rules apply to the carryback and carryforward of 

foreign taxes paid or accrued on foreign oil and gas income. 

See section 907(f).

No foreign tax carryovers are allowed for foreign taxes 

paid or accrued on section 951A category income. Leave 

line 10 of Form 1116 blank if you complete a Form 1116 for 

TIP TIP

section 951A category income, as carrybacks and carryovers 

aren’t allowed for this category of income.

File Form 1040-X or other amended return and a revised 

Form 1116 for the earlier tax year to which you are carrying 

back excess foreign taxes.

Special rules for carryforwards of pre-2018 unused foreign taxes. Unused foreign taxes in the pre-2018 separate 

category for general income carried forward are generally 

allocated to your post-2017 separate category for general 

income. Alternatively, you can allocate those foreign taxes to 

the post-2017 separate category for foreign branch category 

income to the extent the unused foreign taxes would have 

been allocated to your post-2017 separate category for 

foreign branch category income, and would have been 

unused foreign taxes with respect to that separate category, if 

that separate category had applied in the year or years the 

unused foreign taxes arose. A simplified safe harbor is also 

available for determining the portion of the unused foreign 

taxes that may be allocated to the post-2017 separate 

category for foreign branch category income. See 

Regulations section 1.904-2(j)(1)(iii) for further details.

Restrictions. You can't carry a credit back to a tax year for 

which you claimed a deduction, rather than a credit, for 

foreign taxes paid or accrued. However, you must reduce the 

amount of any carryback or carryforward by the amount that 

you would have used had you chosen to claim a credit rather 

than a deduction in that year.

If, for any year, you elected to claim the foreign tax credit 

without filing Form 1116 (as explained earlier), the following 

rules apply.

• You can't carry over unused foreign taxes paid or accrued 

in a year to which the election doesn't apply to or from any 

year for which you made the election.

• The carryback-carryforward period isn't extended if you 

are unable to use a carryback or carryforward because you 

made the election.

• Don't reduce the carryback or carryforward by the amount 

you would have used in the election year if you hadn't made 

the election.

More information. See Pub. 514 for more information on 

carryback and carryforward provisions, including examples.

Line 12

You may have to reduce the foreign taxes you paid or 

accrued by the following items.

• Taxes on income excluded on Form 2555. Reduce 

taxes paid or accrued by the taxes allocable to any foreign 

earned income excluded on Form 2555. If only part of your 

foreign earned income is excluded, you must determine the 

amount of tax allocable to excluded income. To do so, 

multiply the foreign taxes paid or accrued on foreign earned 

income received or accrued during the tax year by the 

following fraction.

Numerator: Foreign earned income and housing amounts 

you excluded for the tax year minus otherwise deductible 

expenses (not including the foreign housing deduction) 

allocable to that income.

Denominator: Your total foreign earned income received or 

accrued during the tax year minus deductible expenses 

(including the foreign housing deduction) allocable to that 

income. However, if the foreign jurisdiction charges tax on 

foreign earned income and some other income (for example, 

earned income from U.S. sources or a type of income not 

subject to U.S. tax) and the taxes on the other income can't 

Instructions for Form 1116 (2023) 19
be segregated, the denominator is the total amount of 

income subject to foreign tax minus deductible expenses 

allocable to that income.

• Taxes on income from Puerto Rico exempt from U.S. 

tax. The reduction applies if you have income from Puerto 

Rican sources that isn't taxable on your U.S. tax return. To 

figure the credit, reduce your foreign taxes paid or accrued by 

the taxes allocable to the exempt income. See Pub. 570 for 

more information.

• Taxes on income from American Samoa excluded on 

Form 4563. If you are a bona fide resident of American 

Samoa, reduce taxes paid or accrued by any taxes 

attributable to income from sources in American Samoa 

excluded on Form 4563. For more information, see Pub. 570.

• Taxes on combined foreign oil and gas income. 

Reduce taxes paid or accrued by a portion of taxes imposed 

on combined foreign oil and gas income. The amount of the 

reduction is the amount by which your foreign oil and gas 

taxes exceed the amount of your combined foreign oil and 

gas income for the year multiplied by a fraction equal to your 

pre-credit U.S. tax liability divided by your worldwide taxable 

income. You may be entitled to carry over to other years taxes 

reduced under this rule. See section 907(f).

Combined foreign oil and gas income is the sum of foreign 

oil-related income and foreign oil and gas extraction income. 

Foreign oil and gas taxes are the sum of foreign oil and gas 

extraction taxes and foreign oil-related taxes.

• Taxes on foreign mineral income. Reduce taxes paid or 

accrued on mineral income from a foreign country or U.S. 

possession if you took a deduction for percentage depletion 

under section 613 for any part of the mineral income.

• Reduction for failure to file Form 5471. U.S. 

shareholders who control a foreign corporation must file Form 

5471, Information Return of U.S. Persons With Respect To 

Certain Foreign Corporations. If you don't file Form 5471 and 

furnish all of the information required by the due date of your 

tax return, reduce by 10% all foreign taxes that you may 

otherwise take into account for the foreign tax credit. You may 

have to make additional reductions if the failure continues. 

See section 6038(c) and Regulations section 1.6038-2(k) for 

details and exceptions.

Note. The reduction in foreign taxes is reduced by any dollar 

penalty imposed under section 6038(b).

• Reduction for failure to file Form 8865. U.S. partners 

who control a foreign partnership must file Form 8865, Return 

of U.S. Persons With Respect to Certain Foreign 

Partnerships. If you don't file Form 8865 and furnish all of the 

information required by the due date of your tax return, 

reduce by 10% all foreign taxes that you may otherwise take 

into account for the foreign tax credit. You may have to make 

additional reductions if the failure continues. See section 

6038(c) and Regulations section 1.6038-3(k) for details and 

exceptions.

Note. The reduction in foreign taxes is reduced by any dollar 

penalty imposed under section 6038(b).

• Reduction of taxes or credit due to international 

boycott operations. In general, if you agree to participate in, 

or cooperate with, an international boycott, you must file 

Form 5713, International Boycott Report, and attach all 

supporting schedules. In addition, you must reduce either the 

total taxes available for credit or the credit otherwise 

allowable by your foreign taxes resulting from boycott 

activities. If you can figure the taxes specifically attributable to 

boycott operations, enter the amount on line 12. If you can't 

figure the amount of taxes specifically attributable to boycott 

operations, multiply the credit otherwise allowable by the 

international boycott factor (figured on Schedule A (Form 

5713), International Boycott Factor) and enter the result on 

Form 1116, line 34. Attach a statement to Form 1116 

showing in detail how you figured the reduction.

For more information, see Form 5713 and its instructions.

• Taxes related to a foreign tax credit splitting event. 

Reduce taxes paid or accrued by any taxes paid or accrued 

with respect to a foreign tax credit splitting event. If there is a 

foreign tax credit splitting event, you may not take the foreign 

tax into account before the tax year in which you take the 

income into account. There is a foreign tax credit splitting 

event with respect to a foreign income tax if the related 

income is (or will be) taken into account by a covered person. 

A covered person is either of the following.

1. An entity in which you hold, directly or indirectly, at 

least a 10% ownership interest (determined by vote or value).

2. Any person who is related to you. For a list of related 

persons, see Nondeductible Loss in chapter 2 of Pub. 544.

A covered asset acquisition under section 901(m) isn't a 

foreign tax credit splitting event under section 909.

For more information, see section 909 and the regulations 

under that section.

Line 13

You must adjust the foreign taxes paid or accrued if they 

relate to passive income that is treated as other category 

income because it is high taxed. On your Form 1116 for 

passive category income, enter as a negative number (in 

parentheses) the amount of your foreign taxes that relate to 

that income. On your Form 1116 for the other category 

income, enter as a positive number the amount of foreign 

taxes that relate to that income.

Line 15

The amount on line 15 is your taxable income (or loss), 

before adjustments, from sources outside the United States. 

If the amount on line 15 is zero or a loss, you generally have 

no foreign tax credit for the category of income checked 

above Part I of this Form 1116. However, you must complete 

line 16 and continue with the form even if line 15 is zero or a 

loss.

Line 16

You are required to increase or decrease the amount on 

line 15 by the following adjustments. The adjustments must 

be made in the order listed. If you have more than one 

adjustment, enter the net adjustment on line 16 and attach a 

detailed statement showing your computation. See Pub. 514 

for more details on these adjustments.

The adjustments are as follows.

1. Adjustment for disallowed business loss under section 461(l). Increase the amount on line 15 by the amount of 

any business loss that is disallowed under section 461(l) to 

the extent it is attributable to the separate category of income 

of the applicable Form 1116. For purposes of adjustments 2–

6 described below, any reference to an amount on line 15 

shall mean the amount on line 15 after taking into account 

this adjustment for disallowed business loss.

20 Instructions for Form 1116 (2023)
2. Allocation of foreign losses. If you have a loss on 

line 15 of one Form 1116 and you have income on line 15 of 

one or more other Forms 1116, you must reduce the foreign 

income by a pro rata share of the loss before you use any 

remaining loss to reduce U.S. source income.

If the loss reduces foreign source income, you must 

create, or increase the balance in, a separate limitation loss 

account and you must recharacterize the income you receive 

in the loss category in later years. See 5. Recapture of 

separate limitation loss accounts, later. In situations where 

the loss to be allocated exceeds foreign income in other 

categories:

• The excess reduces U.S. source income (as modified 

under Capital losses next);

• You must create, or increase the balance in, an overall 

foreign loss account; and

• For later years, you must follow the rules described under 

4. Recapture of prior year overall foreign loss accounts, later.

If the loss in one category reduces foreign source income 

in another category and that second category has a separate 

limitation loss account with respect to the first category, then 

the two offsetting separate limitation loss account balances 

are netted for purposes of determining the amount of income 

in either category that is subject to recharacterization under 

5. Recapture of separate limitation loss accounts, later.

Capital losses. In determining your U.S. source income, 

reduce the amount of any capital losses from U.S. sources by 

the amount you entered on line 4 of Worksheet A or line 5 of 

the Line 2 Worksheet for Worksheet B. If you have capital 

losses from U.S. sources and you didn't use either Worksheet 

A or Worksheet B, see Pub. 514 to determine your U.S. 

source income.

Example. For 2023, you completed three Forms 1116. 

The first had a loss from general category income of $2,000 

on line 15, the second had passive category income of 

$4,000 on line 15, and the third had income of $1,000 from 

the certain income re-sourced by treaty category on line 15. 

You must allocate the $2,000 loss between the passive 

category income and the certain income re-sourced by treaty 

category in the same proportion as each category's income 

bears to the total foreign income.

The amount of the loss that would reduce passive 

category income would be 80% ($4,000/$5,000) of the 

$2,000 loss, or $1,600. Include the $1,600 (in parentheses) 

on line 16 of the passive category income Form 1116. 

Assuming you have no other line 16 adjustments, enter 

$2,400 ($4,000 − $1,600) on line 17 of that form.

The amount of the loss that would reduce the certain 

income re-sourced by treaty would be 20% ($1,000/$5,000) 

of the $2,000 loss, or $400. Include the $400 (in 

parentheses) on line 16 of the certain income re-sourced by 

treaty Form 1116. Assuming you have no other line 16 

adjustments, enter $600 ($1,000 − $400) on line 17 of that 

form.

In this case, all of the $2,000 loss was allocated between 

the foreign source passive category income and the certain 

income re-sourced by treaty category, and no reduction was 

made to U.S. source income.

If you receive general category income in a later year, you 

must recharacterize all or part of that income as passive 

category income and certain income re-sourced by treaty in 

that later year. See the example under 5. Recapture of 

separate limitation loss accounts, later.

3. Allocation of U.S. losses. If you have a net loss from 

U.S. sources, proportionately allocate that loss among the 

separate categories of your foreign income. Reduce the 

income on line 15 (adjusted by any allocation of losses, as 

described earlier under 2. Allocation of foreign losses) by 

including (in parentheses) on line 16 the allocable portion of 

any U.S. loss. In later years, you will be allowed to treat part 

of your U.S. source income as foreign source income.

A U.S. loss includes a rental loss on property located in 

the United States. If you have any qualified dividends or 

capital gains (including capital gain distributions) or losses for 

the tax year and you are required to make any adjustments to 

those amounts, as explained under Foreign Qualified 

Dividends and Capital Gains (Losses), earlier, or in the 

instructions for line 18, the amount of your U.S. loss is the 

excess of:

a. The total of the amounts entered on line 15 for each 

Form 1116 you are filing, over

b. The amount entered on line 18 of the Form 1116.

You allocate the net loss to a separate category of income 

by multiplying the net loss by a fraction. The numerator of the 

fraction is the foreign source income in a separate category, 

and the denominator is the total foreign source income in all 

separate categories.

4. Recapture of prior year overall foreign loss accounts. 

If you had an overall foreign loss in a prior year that offset 

U.S. source income, a part of your foreign income (in the 

same category as the loss) is recharacterized as U.S. source 

income in each following tax year.

The part of your total foreign income subject to 

recharacterization is the lesser of the following.

a. The total amount of maximum potential recapture in all 

overall foreign loss accounts. The maximum potential 

recapture in any account for a category is the lesser of:

i. The current year taxable income from foreign sources in 

that category (the amount from line 15, less any adjustment 

for allocation of losses, as described earlier under 2. 

Allocation of foreign losses and 3. Allocation of U.S. losses 

for that category); or

ii. The balance in the overall foreign loss account for that 

category.

b. 50% (or more, if you choose) of your total taxable 

income from foreign sources.

If the total foreign income subject to recharacterization is 

the amount described in (a), earlier, then for each separate 

category the recapture amount is the maximum potential 

recapture amount for that category. If the total foreign income 

subject to recharacterization is the amount described in (b) 

above, then for each separate category the recapture amount 

is computed by multiplying the total recapture amount by the 

following fraction:

Maximum potential recapture amount for the overall foreign loss 

account in the separate category

Total amount of maximum potential recapture in all overall 

foreign loss accounts

Reduce the amount on line 15 by including (in 

parentheses) on line 16 the amount of the recapture for the 

category checked above Part I, as determined above. Be 

sure to attach your computation. If you elect to recapture 

Instructions for Form 1116 (2023) 21
more of an overall foreign loss than is required ((b) above), 

show in your computation the percentage of taxable income 

recharacterized and the dollar amount recharacterized.

Attach a statement to Form 1116 showing the balance in 

each separate category overall foreign loss account. See 

Regulations section 1.904(f)-1(b) for more information.

Dispositions of certain property. If you generated 

foreign source gain in the same category as the overall 

foreign loss on a disposition of property that was used 

predominantly in a foreign trade or business and that 

generated foreign source income in the same category as the 

overall foreign loss, then the gain on the disposition may be 

subject to recharacterization as U.S. source income to the 

extent of 100% of your foreign source taxable income. This is 

true whether or not you would otherwise recognize gain on 

the disposition. See section 904(f)(3).

The above rule also generally applies to a gain on the 

disposition of stock in a CFC, if you owned more than 50% 

(by vote or value) of the stock right before you disposed of it. 

See section 904(f)(3)(D) for more information and 

exceptions.

Reduce line 15 by including (in parentheses) on line 16 

the smallest of:

a. The amount of the gain not recaptured above;

b. The remaining amount of the overall foreign loss not 

recaptured in earlier years or in the current year; or

c. The amount from line 15 (less any adjustment for 

allocation of losses, as described earlier under 2. Allocation 

of foreign losses and 3. Allocation of U.S. losses, and any 

adjustment for any recapture above).

See Pub. 514 if you disposed of property described above 

and you recognized foreign source gain in a different 

category than the overall foreign loss, you recognized U.S. 

source gain, or you didn't recognize gain.

5. Recapture of separate limitation loss accounts. If, in a 

prior tax year, you reduced your foreign taxable income in the 

category checked above Part I by a pro rata share of a loss 

from another category, you must recharacterize in 2023 all or 

part of any income you receive in 2023 in that loss category. 

If you have separate limitation loss accounts in the loss 

category relating to more than one other category and the 

total balances in those loss accounts exceed the income you 

receive in 2023 in the loss category, then income in the loss 

category is recharacterized as income in those other 

categories in proportion to the balances of the separate 

limitation loss accounts for those other categories. You 

recharacterize the income by:

• Increasing the amount on line 15 (adjusted by any of the 

other adjustments previously mentioned in these line 16 

instructions) of the Form 1116 for each of the separate 

categories, other than the loss category, previously reduced 

by including on line 16 any recharacterized income; and

• Decreasing the amount on line 15 (adjusted by any of the 

other adjustments previously mentioned in these line 16 

instructions) of the Form 1116 for the loss category by 

including on line 16 the amount of recharacterized income as 

a negative number (in parentheses).

Example. Using the facts in the Example under 

2. Allocation of foreign losses, earlier, in the next year (2024), 

you have $5,000 of general category income, $3,000 of 

passive category income, and $500 of certain income 

re-sourced by treaty. Because $1,600 of the general category 

income loss was used to reduce your passive category 

income in 2023, $1,600 of your 2024 general category 

income must be recharacterized as passive category income. 

Similarly, $400 of the general category income must be 

recharacterized as certain income re-sourced by treaty. On 

your 2024 Form 1116 for passive category income, you 

would include $1,600 on line 16. On your 2024 Form 1116 for 

certain income re-sourced by treaty, you would include $400 

on line 16. On your 2024 Form 1116 for general category 

income, you would include ($2,000) on line 16.

Recharacterizing income from a separate category 

doesn't result in recharacterizing any tax.

6. Recapture of overall domestic loss accounts. If you 

have an overall domestic loss for any tax year beginning after 

2006, you must create, or increase the balance in, an overall 

domestic loss account and you must recharacterize a portion 

of your U.S. source taxable income as foreign source taxable 

income in succeeding years for purposes of the foreign tax 

credit.

The part that is treated as foreign source taxable income 

for the tax year is the smaller of:

• The total balance in your overall domestic loss account in 

each separate category (less amounts recaptured in earlier 

years), or

• 50% of your U.S. source taxable income for the tax year.

Under the Tax Cuts and Jobs Act, section 904(g)(5) 

allows for an election to recapture up to 100% of any 

pre-2018 unused overall domestic loss from a prior 

year, as opposed to the 50% stated in the previous 

paragraph. This election is applicable for any tax year 

beginning after December 31, 2017, and before January 1, 

2028.

You must establish and maintain separate overall 

domestic loss accounts for each separate category in which 

foreign source income is offset by the domestic loss. The 

balance in each overall domestic loss account is the amount 

of the overall domestic loss subject to recapture. The 

recharacterized income is allocated among and increases 

foreign source income in separate categories in proportion to 

the balances of the overall domestic loss accounts for those 

separate categories. You increase the amount on line 15 (as 

adjusted by any of the other adjustments previously 

mentioned in these line 16 instructions) of the Form 1116 for 

each of the separate categories to which the recharacterized 

income is allocated.

Overall domestic loss defined. In a tax year in which 

you choose to claim the foreign tax credit, the overall 

domestic loss is the domestic loss for that tax year to the 

extent that it offsets foreign source taxable income for that tax 

year or for any preceding tax year (in which you choose to 

claim the foreign tax credit) because of a carryback. If you 

don't choose to claim the foreign tax credit for a tax year, the 

overall domestic loss is the domestic loss for that tax year to 

the extent that it offsets foreign source taxable income for any 

preceding tax year (in which you chose to claim the foreign 

tax credit) because of a carryback.

Domestic loss. A domestic loss is the amount by which 

the U.S. source gross income for the tax year is exceeded by 

the sum of the expenses, losses, and other deductions 

properly allocated or apportioned to that income. Determine 

this amount by taking into account any net operating loss 

carried forward from a prior tax year (but not any loss carried 

back). If you have any capital gains or losses, take them into 

account after any adjustments required under Foreign 

Qualified Dividends and Capital Gains (Losses), earlier.

TIP

CAUTION

!

22 Instructions for Form 1116 (2023)
Line 18

If you have qualified dividends or capital gains, you may be 

required to make adjustments to those qualified dividends 

and gains before you take those amounts into account on 

line 18.

Individuals Who Completed a Qualified Dividends 

and Capital Gain Tax Worksheet

If you completed the Qualified Dividends and Capital Gain 

Tax Worksheet in the Instructions for Form 1040, you must 

use the Worksheet for Line 18 to figure the amount to enter 

on line 18 if:

1. Line 5 of your Qualified Dividends and Capital Gain 

Tax Worksheet is greater than zero, and

2. Line 23 of your Qualified Dividends and Capital Gain 

Tax Worksheet is less than line 24 of that worksheet.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your qualified dividends 

and capital gains. You make this election by not completing 

the Worksheet for Line 18. You must make this election if you 

have any foreign qualified dividends or foreign capital gains 

(or losses) and you chose not to make any adjustments to 

those amounts when you completed lines 1a and 5. You can't 

make this election if you have any foreign qualified dividends 

or foreign capital gains (or losses) and you made 

adjustments to those amounts when you completed lines 1a 

and 5. In this case, complete the Worksheet for Line 18.

If you aren't required to complete the Worksheet for 

Line 18 or you qualify for the adjustment exception and elect 

not to adjust your qualified dividends and capital gains, enter 

on line 18 of Form 1116 your taxable income from Form 

1040, 1040-SR, or 1040-NR, line 15.

You qualify for the adjustment exception if you meet both 

of the following requirements.

1. Line 5 of the Qualified Dividends and Capital Gain Tax 

Worksheet doesn't exceed:

a. $364,200 if married filing jointly or qualifying surviving 

spouse,

b. $182,100 if married filing separately,

c. $182,100 if single, or

d. $182,100 if head of household.

2. The amount of your foreign source net capital gain, 

plus the amount of your foreign source qualified dividends, is 

less than $20,000.

If you are subject to the alternative minimum tax, see the 

special rules in Regulations section 1.904(b)-1(b)(3).

Your foreign source net capital gain is the excess of 

your foreign source net long-term capital gain over 

your foreign source net short-term capital loss.

Completing the Worksheet for Line 18. If you do need to 

complete the Worksheet for Line 18, do the following.

Lines 2 through 5. Skip these lines.

Line 6. Enter the amount from line 20 of the Qualified 

Dividends and Capital Gain Tax Worksheet.

TIP

Worksheet for Line 18 (Worldwide Qualified Dividends and Capital 

Gains) Keep for Your Records

CAUTION

!

See the instructions for line 18 before starting this worksheet.

1. Individuals: Enter the amount from Form 1040, 1040-SR, or 1040-NR, line 15. 

Estates and trusts: Enter taxable income without the deduction for your exemption ....... 1.

2. Enter your worldwide 28% gains. See instructions .............. 2.

3. Multiply line 2 by 0.2432 ..................................... 3.

4. Enter your worldwide 25% gains. See instructions .............. 4.

5. Multiply line 4 by 0.3243 ..................................... 5.

6. Enter your worldwide 20% gains and qualified dividends. See 

instructions ................................................ 6.

7. Multiply line 6 by 0.4595 ..................................... 7.

8. Enter your worldwide 15% gains and qualified dividends. See 

instructions ................................................ 8.

9. Multiply line 8 by 0.5946 ..................................... 9.

10. Enter your worldwide 0% gains and qualified dividends. See 

instructions ................................................ 10.

11. Add lines 3, 5, 7, 9, and 10 .......................................................... 11.

12. Subtract line 11 from line 1. Enter the result here and on Form 1116, line 18 ............... 12.

Instructions for Form 1116 (2023) 23
Line 8. Enter the amount from line 17 of the Qualified 

Dividends and Capital Gain Tax Worksheet.

Line 10. Enter the amount from line 9 of the Qualified 

Dividends and Capital Gain Tax Worksheet.

Complete all other lines as instructed on the worksheet.

Estates and Trusts That Completed a Qualified 

Dividends Tax Worksheet or Schedule D

If you completed the Qualified Dividends Tax Worksheet in 

the Instructions for Form 1041 or you completed Part V of 

Schedule D (Form 1041), you must use the Worksheet for 

Line 18 to figure the amount to enter on line 18 if:

1. You figured your tax using the Qualified Dividends Tax 

Worksheet, line 5 of that worksheet is greater than zero, and 

line 21 of that worksheet is less than line 22; or

2. You figured your tax using Part V of Schedule D (Form 

1041), line 27 of Schedule D is greater than zero, and line 43 

of Schedule D is less than line 44.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your qualified dividends 

and capital gains. You make this election by not completing 

the Worksheet for Line 18. You must make this election if you 

have any foreign qualified dividends or foreign capital gains 

(or losses) and you chose not to make any adjustments to 

those amounts when you completed lines 1a and 5. You can't 

make this election if you have any foreign qualified dividends 

or foreign capital gains (or losses) and you made 

adjustments to those amounts when you completed lines 1a 

and 5. In this case, complete the Worksheet for Line 18. See 

section 904(b) and the regulations issued under that Code 

section to determine if you qualify for the adjustment 

exception.

Your foreign source net capital gain is the excess of 

your foreign source net long-term capital gain over 

your foreign source net short-term capital loss.

If you aren't required to complete the Worksheet for 

Line 18 or you qualify for the adjustment exception and elect 

not to adjust your qualified dividends and capital gains, enter 

on line 18 of Form 1116 the estate's or trust's taxable income 

without the deduction for its exemption.

Completing the Worksheet for Line 18. If you do need to 

complete the Worksheet for Line 18, do the following.

Lines 2 through 5. Skip these lines.

Line 6. Enter the amount from line 18 of the Qualified 

Dividends Tax Worksheet or line 40 of Schedule D.

Line 8. Enter the amount from line 14 of the Qualified 

Dividends Tax Worksheet or line 36 of Schedule D.

Line 10. Enter the amount from line 8 of the Qualified 

Dividends Tax Worksheet or line 30 of Schedule D.

Complete all other lines as instructed on the worksheet.

Taxpayers Who Completed the Schedule D Tax 

Worksheet

If you figured your tax using the Schedule D Tax Worksheet 

(in the Schedule D (Form 1040) instructions or in the 

Schedule D (Form 1041) instructions), you may have to use 

the Worksheet for Line 18 to figure the amount of tax to enter 

on line 18 of Form 1116.

TIP

Form 1040, 1040-SR, or 1040-NR filers. You must use the 

Worksheet for Line 18 to figure the amount of tax to enter on 

line 18 of Form 1116 if:

• Line 18 of the Schedule D Tax Worksheet is greater than 

zero, and

• Line 45 of the Schedule D Tax Worksheet is less than 

line 46.

Form 1041 filers. You must use the Worksheet for Line 18 

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 

zero, and

• Line 42 of the Schedule D Tax Worksheet is less than 

line 43.

Adjustment exception. If you qualify for the adjustment 

exception, you can elect not to adjust your qualified dividends 

and capital gains. You make this election by not completing 

the Worksheet for Line 18. You must make this election if you 

have any foreign qualified dividends or foreign capital gains 

(or losses) and you chose not to make any adjustments to 

those amounts when you completed lines 1a and 5. You can't 

make this election if you have any foreign qualified dividends 

or foreign capital gains (or losses) and you made 

adjustments to those amounts when you completed lines 1a 

and 5. In this case, complete the Worksheet for Line 18.

You qualify for the adjustment exception if:

1. The amount of your foreign source qualified dividends, 

plus the amount of your foreign source net capital gain, is 

less than $20,000; and

2. Line 18 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1040) instructions is less than or equal to:

a. $364,200 if married filing jointly or qualifying surviving 

spouse,

b. $182,100 if married filing separately,

c. $182,100 if single, or

d. $182,100 if head of household.

(Or, for trusts and estates, see section 904(b) and the 

regulations issued under that Code section to determine if 

you qualify for the adjustment exception.)

If you are subject to the alternative minimum tax, see the 

special rules in Regulations section 1.904(b)-1(b)(3).

Your foreign source net capital gain is the excess of 

your foreign source net long-term capital gain over 

your foreign source net short-term capital loss. Ignore 

any foreign source qualified dividends or capital gains that 

you elected to include on Form 4952, line 4g, in determining 

the amount of your foreign source qualified dividends and net 

capital gain.

If you aren't required to complete the Worksheet for 

Line 18 or you qualify for the adjustment exception and elect 

not to adjust your qualified dividends and capital gains, enter 

on line 18 of Form 1116 your taxable income without the 

deduction for your exemption (for example, the amount from 

Form 1040, 1040-SR, or 1040-NR, line 15).

If you do need to complete the Worksheet for Line 18, do 

the following.

Line 2. Enter the amount (if any) from line 42 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

instructions or line 39 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1041) instructions.

Line 4. Enter the amount (if any) from line 39 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

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24 Instructions for Form 1116 (2023)
instructions or line 36 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1041) instructions.

Line 6. Enter the amount (if any) from line 33 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

instructions or line 30 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1041) instructions.

Line 8. Enter the amount (if any) from line 30 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

instructions or line 26 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1041) instructions.

Line 10. Enter the amount (if any) from line 22 of the 

Schedule D Tax Worksheet in the Schedule D (Form 1040) 

instructions or line 19 of the Schedule D Tax Worksheet in the 

Schedule D (Form 1041) instructions.

Complete all other lines as instructed on the worksheet.

Line 20

If you are completing line 20 for separate category g 

(lump-sum distributions), enter the amount from line 5 of the 

Worksheet for Lump-Sum Distributions.

Don't complete line 20 for separate category e (section 

901(j) income), discussed earlier.

For all other applicable categories, complete line 20 as 

follows.

Individuals. Enter the total of Form 1040, 1040-SR, or 

1040-NR, line 16, and Schedule 2 (Form 1040), Part I, line 2, 

less any tax included on line 16 from Form 4972.

Estates and trusts. 

• Form 1041 filers. Enter the amount from Form 1041, 

Schedule G, line 1a.

• Form 990-T filers. Enter the total of Form 990-T, Part II, 

lines 2, 3, 4, and 6. However, don't include any taxes listed in 

section 26(b) that are included in Part II, line 4. For example, 

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.

You may need to adjust the amount you report on Form 

1116, line 20, by the amounts reported on Form 8978, 

line 14. If you file Form 8978, Partner’s Additional Reporting 

Year Tax, you will need to increase or decrease the amount 

you report on Form 1116, line 20, by the amount of any 

positive or negative tax from Form 8978, line 14, that you 

report on your tax return and that isn’t already included on the 

lines specified earlier. For example, for Form 1040, a positive 

Form 8978 adjustment is already included in the tax reported 

on Form 1040, line 16, while a negative tax adjustment is not. 

If after your adjustment, the amount of your tax is zero or less, 

enter -0- on Form 1116, line 20. If any additional guidance is 

provided related to reporting amounts from Form 8978 on 

Form 1116, we will post it at IRS.gov/Form1116 under Recent 

Developments.

Line 22

If you have included in gross income an amount of income of 

a controlled foreign corporation (CFC) in prior years under 

section 951(a), you may have established an excess 

limitation account under section 960(c). If that is the case and 

you receive a distribution of previously taxed earnings of the 

CFC in the current year that are excluded from your gross 

income under section 959(a) and you paid or accrued foreign 

tax with respect to that distribution, you may be eligible for an 

increase in your foreign tax credit limitation under section 

960(c). Report on line 22 any such increase in limitation. See 

section 960(c) and Regulations section 1.960-4 for more 

details to determine if you are available for an increase in 

limitation.

Line 24

The maximum foreign tax credit you can claim in the current 

year is generally limited to the allocated amount of U.S. tax 

imposed on the foreign income, or the actual amount of 

foreign tax paid or accrued on the foreign income (after 

reductions required on line 12), whichever is less. However, 

see Foreign Taxes Eligible for a Credit, earlier, for additional 

information.

If the amount on line 23 is smaller than the amount on 

line 14, see Pub. 514 for more information on carryback and 

carryforward provisions, including examples.

Part IV—Summary of Credits From 

Separate Parts III

Complete lines 25 through 31 in Part IV only if you must 

complete more than one Form 1116 because you have more 

than one of the categories of income listed above Part I.

Complete Part IV on only one Form 1116 (the one with the 

largest amount entered on line 24) to summarize the credits 

you figured on all of your Forms 1116. However, see 

Exception below. Enter the credits from line 24 of all of your 

Forms 1116 on lines 25 through 31 of the Form 1116 you are 

using to summarize your credits. File the other Forms 1116 

as attachments.

Exception. If you completed a Form 1116 for category g 

(lump-sum distributions) or e (section 901(j) income), don't 

use Part IV of that Form 1116 as your summary, unless you 

are filing both a Form 1116 for category g and a Form 1116 

for category e but no other category.

Line 33

Enter the smaller of line 20 or line 32.

Note. Generally, line 32 will exceed line 20 only if you have 

U.S. capital gains or qualified dividends that are subject to 

the capital gain rate differential (figured in the Worksheet for 

Line 18).

Schedule B (Form 1116) and Schedule C (Form 

1116)

See the separate instructions for Schedule B (Form 1116) 

and Schedule C (Form 1116) to see if you must file these 

schedules.

Paperwork Reduction Act Notice. We ask for the 

information on this form to carry out the Internal Revenue 

laws of the United States. You are required to give us the 

information. We need it to ensure that you are complying with 

these laws and to allow us to figure and collect the right 

amount of tax.

You aren't required to provide the information requested 

on a form that is subject to the Paperwork Reduction Act 

unless the form displays a valid OMB control number. Books 

or records relating to a form or its instructions must be 

retained as long as their contents may become material in the 

administration of any Internal Revenue law. Generally, tax 

Instructions for Form 1116 (2023) 25
returns and return information are confidential, as required by 

section 6103.

The time needed to complete and file this form will vary 

depending on individual circumstances. The estimated 

burden for individual taxpayers filing this form is approved 

under OMB control number 1545-0074 and is included in the 

estimates shown in the instructions for their individual income 

tax return. The estimated burden for all other taxpayers who 

file this form is Recordkeeping, 2 hr., 43 min.; Learning 

about the law or the form, 1 hr., 1 min.; Preparing the 

form, 1 hr., 42 min.; Copying, assembling, and sending 

the form to the IRS, 34 min.

If you have comments concerning the accuracy of these 

time estimates or suggestions for making this form simpler, 

we would be happy to hear from you. You can write to the IRS 

at the address listed in the instructions of the tax return with 

which this form is filed.

26 Instructions for Form 1116 (2023)