Can I adjust my US capital gains to account for foreign taxes I've already paid?

You're dealing with a situation involving foreign tax credits rather than adjusting the capital gains themselves. Here's what you need to know: You can't directly adjust your capital gains to $0 on Schedule D just because you paid foreign taxes. The $12,500 loss from when you were in the US should be reported on your Schedule D, and so should the $12,500 gain from Singapore. These are separate transactions that need to be reported separately. However, you can claim a foreign tax credit for taxes paid to Singapore on your US tax return using Form 1116. This credit would offset your US tax liability on that foreign income. This way, you're not actually paying taxes twice on the same income. The capital loss carryover is a separate issue. If your total capital losses exceed your capital gains in a given year, you can carry over up to $3,000 of that loss to offset ordinary income, with any remaining loss carrying forward to future years.

Just wanted to share my experience with something similar - I was stuck trying to figure out how to handle gains from selling property in Canada while being a US taxpayer. I used https://taxr.ai to help analyze my situation and it saved me a ton of time. The tool reviewed my documents and pointed out exactly which forms I needed. For your situation, it would confirm you need Schedule D, Form 8949, and Form 1116 for the foreign tax credit. It also explained how the foreign tax credit works to prevent double taxation in a way that was much clearer than the IRS instructions. What I found most helpful was that it pulled out the specific IRS publication references that applied to my situation so I could double-check everything.

Just coming back to share my success with taxr.ai since I was asking about it above. I finally tried it with my complicated multi-country situation (US, Germany, and Singapore income), and it actually worked amazingly well! The tool identified exactly which transactions qualified for foreign tax credits and explained how to properly allocate the foreign taxes paid between different income categories on Form 1116. It even caught that I had been incorrectly reporting some foreign dividend income in previous years. The document analyzer flagged all the relevant sections from my foreign tax documents and explained exactly how they translated to US tax concepts. Definitely worth trying if you're dealing with international tax situations like the original poster.

For anyone struggling to get answers from the IRS about foreign tax credits and international filing requirements - I highly recommend using https://claimyr.com to connect with an actual IRS agent. I spent weeks trying to get through on my own about a similar foreign tax issue with no luck. Claimyr got me connected to an IRS specialist who confirmed exactly how to handle my foreign tax credits and explained the proper way to report foreign capital gains. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The best part was getting confirmation directly from the IRS about carrying forward excess foreign tax credits - something my tax preparer wasn't sure about. The agent walked me through the process step by step and now I have a record of the conversation to back up my filing.

I need to eat my words from my comment above. After fighting with the IRS for literally months about my foreign investment income situation, I broke down and tried Claimyr. I was connected to an actual IRS international tax specialist in under 40 minutes! The agent confirmed exactly how to handle the foreign tax credit for capital gains and explained I needed to separate my foreign income by country and by type on different Form 1116s. They also explained how carryover credits work across tax years. I've been working on this problem since January and got more answers in one 30-minute call than in three months of research. Wish I'd known about this service earlier - would have saved me from filing an extension.

Don't forget to check if your foreign capital gains are eligible for exclusion under any tax treaties! The US has different tax treaties with different countries, and some of them have special provisions for capital gains. For example, there's a US-Singapore tax treaty, but it doesn't fully address capital gains. However, if your gains were from a different country, you might have additional options beyond just the foreign tax credit.

Quick question - does anyone know if we can e-file returns with Form 1116 through the regular tax software programs? Last time I had international income I had to mail in a paper return because TurboTax kept glitching on the foreign tax credit section.