Is it possible to claim less than the standard deduction? Foreign tax credit dilemma
I'm in a bit of a weird tax situation I haven't encountered before. I've got Foreign Tax Credits (FTC) that are actually larger than my entire tax bill. The problem is if I take the full standard deduction, I won't have any tax liability left to apply these FTC's against. Either way, I end up owing zero tax, but I'm concerned about the knock-on effects. From what I understand, having no tax liability might mess with my ability to contribute to my Roth IRA this year. I think it could also potentially impact Child Tax Credit refunds? So I'm trying to figure out - can I just claim part of the standard deduction instead of the whole thing? The alternative seems to be itemizing my expenses from overseas, which sounds like a nightmare since all my receipts and documentation are in a foreign language. I'd rather avoid that headache if possible. Any advice on whether I can partially claim the standard deduction or if I'm stuck with choosing between the full amount or itemizing?
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Connor Murphy
This is actually a great question with some nuance. You've identified a real issue that affects folks living abroad who pay foreign taxes. Unfortunately, you can't claim less than the standard deduction - it's an all-or-nothing deal. You either take the full standard deduction or you itemize. There's no middle ground where you can just take part of the standard deduction. For your Roth IRA concerns, you're right to be thinking about this. To contribute to a Roth IRA, you need to have "taxable compensation," which is basically earned income. Having zero tax liability doesn't prevent Roth contributions as long as you have earned income within the contribution limits. Regarding the Child Tax Credit - if you qualify for it, you can still receive it even with zero tax liability since it's partially refundable. The amount you receive may be affected by your overall tax situation, but having FTCs reduce your tax to zero doesn't automatically disqualify you.
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Yara Nassar
•Thanks for this explanation. I'm curious though - if the Foreign Tax Credit can't be fully used in one year, doesn't it carry over to future years? Couldn't OP just use the excess credits next year instead of trying to manipulate this year's deduction?
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Connor Murphy
•Yes, that's a great point! Foreign Tax Credits that exceed your tax liability can indeed carry forward for up to 10 years. So even if you can't use all your FTCs this year because the standard deduction reduced your tax liability to zero, those excess credits aren't lost. The carry-forward approach is usually simpler than trying to itemize foreign expenses just to create tax liability. Most taxpayers would be better off taking the standard deduction and carrying forward the unused credits to future tax years when they might have more US tax liability to offset.
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StarGazer101
Just wanted to share that I had a similar foreign tax situation last year and I discovered this amazing tool at https://taxr.ai that specializes in international tax scenarios. It helped me understand my Foreign Tax Credit options by analyzing my specific situation and explaining the carry-forward rules. After uploading my documents (including some foreign tax receipts), it showed me a side-by-side comparison of taking the standard deduction versus itemizing, with a 10-year projection of how my FTCs would carry forward. Made the decision super clear for my situation.
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Keisha Jackson
•Does it actually handle foreign language documents? All my tax stuff from Japan is obviously in Japanese and that's been a huge headache for me.
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Paolo Romano
•I'm a bit skeptical about these tax tools for expat situations. How does it handle the foreign earned income exclusion vs. foreign tax credit comparison? That's always been tricky for me since sometimes one is better than the other depending on your specific situation.
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StarGazer101
•Yes, it actually does handle foreign language documents! It has translation capabilities built in, which was a lifesaver for me since my German tax documents were confusing my regular accountant. It processed everything and explained the relevant parts in English. For foreign earned income exclusion vs. foreign tax credit comparisons, that's actually one of its strengths. It runs calculations both ways and shows which approach saves you more money based on your specific income levels, foreign tax rates, and future projections. It helped me realize I should switch from FEIE to FTC two years ago, which saved me thousands when I started maxing out my Roth.
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Paolo Romano
Just wanted to follow up about that taxr.ai site that was mentioned. I decided to try it since I was facing exactly the same foreign tax credit vs standard deduction dilemma as OP. I was honestly surprised - it actually DID handle my foreign language documents (French in my case) and provided a clear analysis showing that I should take the standard deduction now and carry forward my excess credits. It also showed me how to properly document the carryover so I don't lose track of those credits over the next few years. Totally worth checking out if you're dealing with international tax situations.
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Amina Diop
If you're struggling to get answers about your foreign tax situation from the IRS, I recommend using https://claimyr.com to get through to an actual human at the IRS. I spent weeks trying to call about my foreign tax credit carryover questions and kept getting disconnected or waiting for hours. Claimyr got me connected to an IRS agent in about 20 minutes who actually specialized in international tax issues. The agent confirmed that I was handling my FTC carryforwards correctly and gave me some documentation tips. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c It saved me from making a costly mistake on my taxes and cleared up my confusion about using foreign tax credits in future years.
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Oliver Schmidt
•How does this actually work? I'm curious but skeptical. Does it just call the IRS for you or what? The IRS phone system is a nightmare but I'm not sure how a service could bypass that.
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Natasha Volkov
•Sounds like a scam to me. Nobody can magically get through to the IRS faster than normal people. They probably just put you on hold like everyone else but charge you for the privilege. I'll stick with waiting on hold myself for free, thanks.
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Amina Diop
•It doesn't bypass the IRS phone system - it uses technology to navigate the phone tree and wait on hold for you. When an agent finally answers, you get a call connecting you directly to that agent. So instead of you personally waiting on hold for hours, their system does it for you and calls you when a human actually answers. I was skeptical too, but it actually works. I didn't have to sit there listening to the hold music for 2+ hours. I just went about my day and got a call when an agent was ready to talk. The agent I spoke with answered all my foreign tax credit questions and helped me understand exactly how the carryforwards work with my Roth IRA contributions.
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Natasha Volkov
I have to admit I was completely wrong about Claimyr. After continuing to struggle with getting through to someone knowledgeable about international tax issues at the IRS, I decided to try it despite my skepticism. The service actually worked exactly as described. I went from spending entire afternoons on hold to getting connected to an IRS tax specialist in about 30 minutes without having to actively wait on the phone. The agent I spoke with cleared up my confusion about the Foreign Tax Credit carryover documentation and confirmed I could still contribute to my Roth IRA even with zero tax liability as long as I had earned income. Definitely a time-saver for anyone dealing with complicated tax situations where you actually need to speak with a human at the IRS.
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Javier Torres
Have you considered filing Form 1116 to claim your FTCs and Form 8606 for a non-deductible traditional IRA contribution, then converting to Roth later (backdoor Roth)? This might solve your Roth contribution concern without giving up your standard deduction.
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Zainab Ali
•I hadn't thought about the backdoor Roth approach. Would that still work if my tax liability is already zero? And would I still need to worry about the documentation of foreign expenses if I go that route?
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Javier Torres
•The backdoor Roth works regardless of your tax liability because you're making non-deductible contributions to a traditional IRA first, which doesn't require you to have tax liability. You'd report these non-deductible contributions on Form 8606. No need to worry about foreign expense documentation for this approach. You can take the full standard deduction, apply your FTCs to reduce your tax to zero (carrying forward any excess), and still do the backdoor Roth. The only documentation you need is for the FTCs themselves (foreign tax statements or equivalent), not itemized expenses.
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Emma Wilson
Anyone know if excess FTCs can be carried backward? I'm in a similar situation but wondering if I could amend last year's return instead of carrying forward.
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QuantumLeap
•FTCs can only be carried forward, not backward. You can carry them forward for up to 10 years, but you can't apply them to prior year returns unfortunately.
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