Can Non Resident Aliens claim foreign tax credit in U.S.?

Generally if you are a US taxpayer and have foreign source income on which you paid taxes in foreign country, you can claim credit for such taxes in US. However, rules are not the same for the NRAs. Many times it is seen that the NRAs have to report their income both in US as well as in their home country. Generally, due to the foreign tax credit provisions, the same income is not taxed twice. However, NRAs and tax professionals need to be careful while claiming credit in US and examine if US source income is also taxed in their home country. In such cases, the credit cannot be claimed in US due to the fact that the corresponding income is US source income and not foreign source income.

IRS Publication 514 released on January 27, 2011, makes this point amply clear. Taxpayers and professionals should pay attention to this and many other requirements before correctly filling out Form 1116.

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