Summary

In this lesson, you learned that:

• The Foreign Tax Credit is a nonrefundable credit that reduces taxpayers' U.S. tax liability
• U.S. citizens who live in Puerto Rico and have Puerto Rico source income that is liable for taxes in both Puerto Rico and the U.S. may be eligible to take the Foreign Tax Credit
• Form 1116 is used to compute the Foreign Tax Credit for each category of income
  • Part I is used to compute the Puerto Rico and foreign taxable income
  • Part II is for reporting Puerto Rico taxes, paid, or accrued
  • Part III is used to compute the credit allowable
  • Part IV is a summary of the credit