The funds listed in the foreign income worksheet and foreign qualified dividend income worksheet distributed foreign taxes on earnings from investments outside the United States. The foreign taxes distributed by these funds are reported on your Form 1099-DIV, and you may claim a foreign tax credit or deduction for your share of the foreign taxes distributed.
You may claim a foreign tax credit or take an itemized deduction for your share of the foreign taxes distributed by a qualifying fund. However, you will usually receive more benefit by claiming a tax credit.
For more information about the IRS requirements to claim a foreign tax credit, refer to IRS Publication 514, foreign tax credit for individuals. (To order, call (800) 829-3676 or download from the IRS website.)
Note: If you can claim a foreign tax credit directly on Form 1040, you do not need to complete the foreign income or foreign qualified dividend income worksheet.
If you are an individual taxpayer and you meet all of the requirements to claim a foreign tax credit, you can claim the credit directly on IRS Form 1040 if all of the following apply:
If one or more of these do not apply, you must complete the foreign income worksheet and the foreign qualified dividend income worksheet. The information from these worksheets should be reported on IRS Form 1116 (Form 1118 for corporations).
The foreign tax paid can be obtained from either the foreign tax paid amounts shown in the Year-to-Date transaction history section of your year-end statement for all share classes you own or from Box 7 of Form 1099-DIV (individuals only).
According to the IRS, when you are completing Form 1116, you do not need to report income from a mutual fund or other regulated investment company (RIC) on a country-by-country basis. You can simply total all foreign income passed through from a mutual fund or other RIC and enter the total in a single column in Part I. Then enter RIC where the foreign country name is requested. Likewise, total all foreign taxes paid and enter the total on a single line in Part II for the dividends category.
To claim a foreign tax credit, corporations should complete IRS Form 1118 using the foreign income worksheet. Corporations do not need to complete the foreign qualified dividend income worksheet, because corporations are not eligible to receive qualified dividend income.
As a result of European court rulings, some funds received interest on EU reclaims and reported a foreign interest adjustment in 2023 in accordance with IRS Notice 2016-10. This interest adjustment is already included on your Form 1099-DIV. For corporate shareholders who do not receive Form 1099-DIV, you will need to calculate the amount (see Additional information for corporate shareholders)
Generally includes mutual fund income, dividends, interest, royalties, rents, annuities, gains from the sale of non-income-producing investment property, gains from commodities transactions and, generally, capital gains not related to the active conduct of a trade or business.