Foreign Interest Income

[rkutom]

Hello 

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

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

Please update me thanks a lot. 

[sjrcpa]

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

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

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

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

[rkutom]

Thank you 

[rkutom]

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

Can I elect to use the Simplified AMT Foreign Tax Credit Limitation ?? 

[sjrcpa · Accepted solution]

Yes.