Income re-sourced by treaty. For tax years beginning after August 10, 2010, you must compute a separate foreign tax limitation for any item of U.S. source income that is re-sourced as foreign income under an income tax treaty of which you claim benefits. See Certain Income Re-Sourced By Treaty . If your tax year is the calendar year, this change applies to your returns for 2011 and later years.

Suspension of taxes and credits until related income taken into account. Beginning in 2011, new rules prevent splitting foreign tax credits from the income to which they relate. The credit will be not be allowed until the tax year in which the related foreign income is taken into account for tax purposes. For more information, see Internal Revenue Code section 909 and Notice 2010-92 in 2010-52 I.R.B. 916 available at http://www.irs.gov/irb/2010-52_IRB/ar16.html.

Denial of credit for covered asset acquisitions. A foreign tax credit is not allowed on foreign income not subject to U.S. taxation due to a covered asset acquisition after December 31, 2010. A covered asset acquisition is defined as an acquisition that results in a stepped-up basis for U.S. tax purposes but not for foreign tax purposes. For more information, see Internal Revenue Code section 901(m). The IRS intends to issue guidance that will explain this provision in greater detail.

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, for a discussion of the alternative minimum tax foreign tax credit.

Change of address. If your address changes from the address shown on your last return, use Form 8822, Change of Address, to notify the Internal Revenue Service.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability.

In most cases, it is to your advantage to take foreign income taxes as a tax credit. The major scope of this publication is the foreign tax credit.

The publication discusses:

Unless you choose not to be subject to the foreign tax credit limit, you claim the credit by filing Form 1116 with your U.S. income tax return. Two examples with filled-in Forms 1116 are provided at the end of this publication.