Form 1116 must be filed to claim the foreign tax credit if you are an individual, estate, or trust and you paid or accrued certain foreign taxes to a foreign country or U.S. possession. Form 1116 is a very difficult form to complete, however, most people do not have to file Form 1116 to claim the foreign tax credit. To qualify to enter your foreign tax credit directly onto Form 1040 without filing Form 1116 you must meet the following conditions:
- All your foreign source gross income was from the "passive income" category (including most interest and dividends).
- All the income and any foreign taxes paid on it was reported to you on a qualified payee statement (e.g., Form 1099-INT, Form 1099-DIV, or similar substitute statements).
- Your total creditable foreign taxes are not more than $300 ($600 if married filing a joint return).