What’s New

Form 1116, Part IV. Lines 25 through 32 in Part IV must now be completed even when filing only one Form 1116. We revised the text on Form 1116, line 24, to reflect this change. If filing more than one Form 1116, see Part IV , later.

New legislation. Recent legislation (P.L. 119-21), adds new section 151(d)(5)(C), which generally provides a $6,000 deduction for the taxpayer and (in the case of a joint return) the taxpayer’s spouse, if they have reached age 65 before the close of the tax year. This deduction is reported on Schedule 1-A (Form 1040), line 37, and needs to be removed from taxable income for purposes of computing the foreign tax credit limitation. See the instructions for line 3b and line 18, later. This deduction is in effect for tax years 2025 through 2028. P.L. 119-21 also adds new section 960(d)(4), which disallows a credit under section 901 for 10% of any foreign income taxes paid or accrued (or deemed paid under section 960(b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a). Section 960(d)(4) applies to foreign income taxes paid or accrued (or deemed paid under section 960(b)(1)) with respect to any amount excluded from gross income under section 959(a) by reason of an inclusion in gross income under section 951A(a) after June 28, 2025. See Part II , later.