Foreign Qualified Dividends — 2025 Inst 1116 (PDF)

Tip: Qualified dividends are the amounts you entered on Form 1040, 1040-SR, or 1040-NR, line 3a.

If you have foreign source qualified dividends or foreign source capital gains (including any foreign source capital gain distributions) or losses, you may be required to make certain adjustments to those amounts before taking them into account on line 1a (gross income) or line 5 (losses).

If you completed the Qualified Dividends and Capital Gain Tax Worksheet in the Instructions for Form 1040, and aren’t required to file Schedule D, see Qualified Dividends and Capital Gain Tax Worksheet (Individuals) next to determine the adjustments you may be required to make. If you completed the Qualified Dividends Tax Worksheet in the Instructions for Form 1041, see Qualified Dividends Tax Worksheet (Estates and Trusts) , later, to determine the adjustments you may be required to make. If you are required to file Schedule D, see Schedule D Filers, later, to determine the adjustments you may be required to make.

You can elect not to make the adjustments to your qualified dividends and capital gains if you qualify for the adjustment exception. See Adjustment exception under Qualified Dividends and Capital Gain Tax Worksheet (Individuals) , Qualified Dividends Tax Worksheet (Estates and Trusts) , and Schedule D Filers , later.

Qualified Dividends and Capital Gain Tax Worksheet (Individuals) If you completed the Qualified Dividends and Capital Gain Tax Worksheet in the Instructions for Form 1040 and you don’t have to file Schedule D, you may have to adjust the amount of your foreign source qualified dividends and capital gain distributions.

You must adjust the amount of your foreign source qualified dividends and capital gain distributions if both of the following apply.

Line 5 of the Qualified Dividends and Capital Gain Tax Worksheet is greater than zero.
Line 23 of the Qualified Dividends and Capital Gain Tax Worksheet is less than line 24 of that worksheet.

Adjustment exception. If you qualify for the adjustment exception, you can elect not to adjust your foreign source capital gain distributions and qualified dividends. You make this election by not adjusting these items. If you make this election, you must elect not to adjust any of your foreign source qualified dividends or capital gain distributions.

You qualify for the adjustment exception if you meet both of the following requirements.

Line 5 of the Qualified Dividends and Capital Gain Tax Worksheet doesn’t exceed:

a. $394,600 if married filing jointly or qualifying surviving spouse,

b. $197,300 if married filing separately, c. $197,300 if single, or d. $197,300 if head of household. 2. The amount of your foreign source capital gain distributions plus the amount of your foreign source qualified dividends is less than $20,000.

If you are subject to the AMT, see the special rules in Regulations section 1.904(b)-1(b)(3).

How to make adjustments. To adjust your foreign source qualified dividends or capital gain distributions, multiply your foreign source qualified dividends or capital gain distributions in each separate category by 0.4054 if the foreign source qualified dividends or capital gain distributions are taxed at a rate of 15%, and by 0.5405 if they are taxed at a 20% rate. Include the results on line 1a of the applicable Form 1116.

You adjust your foreign source qualified dividends or capital gain distributions taxed at the 0% rate by not including them on line 1a.

No adjustments required. If you aren’t required to adjust the amount of your foreign source qualified dividends or capital gain distributions, or you qualify for the adjustment exception and elect not to adjust these items, include the amount of your foreign source qualified dividends and capital gain distributions in each separate category (without adjustment) on line 1a of the applicable Form 1116.

Qualified Dividends Tax Worksheet (Estates and Trusts) If you completed the Qualified Dividends Tax Worksheet in the Instructions for Form 1041, you must adjust the amount of your foreign source qualified dividends if:

Line 5 of the Qualified Dividends Tax Worksheet is greater than zero, and
Line 21 of the Qualified Dividends Tax Worksheet is less than line 22 of that worksheet.

Adjustment exception. If you qualify for the adjustment exception, you can elect not to adjust your foreign source qualified dividends. You make this election by not adjusting these dividends. If you make this election, you must elect not to adjust any of your foreign source qualified dividends.

Instructions for Form 1116 (2025) 9

See section 904(b) and the regulations issued under that Code section to determine if you qualify for the adjustment exception.

How to make adjustments. To adjust your foreign source qualified dividends, multiply your foreign source qualified dividends in each separate category by 0.4054 if the foreign source qualified dividends are taxed at a rate of 15%, and by 0.5405 if they are taxed at a 20% rate. Include the results on line 1a.

You adjust your foreign source qualified dividends taxed at the 0% rate by not including them on line 1a.

Caution: Don’t adjust the amount of any foreign source qualified dividends that you elected to include on Form 4952, line 4g.

No adjustment required. If you aren’t required to make adjustments to your foreign source qualified dividends (or you qualify for the adjustment exception and you elected not to adjust these dividends), include your foreign source qualified dividends on line 1a of the applicable Form 1116 without adjustment.

Schedule D Filers Note: Throughout these instructions, references to Schedule D (Form 1041) are for estates and trusts only.

Adjustments to foreign qualified dividends. If you are required to file Schedule D (Form 1040), you must adjust the amount of your foreign source qualified dividends that you include on line 1a of Form 1116 if one of the following applies to you.

You figured your tax using the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions, line 5 of that worksheet is greater than zero, and line 23 of that worksheet is less than line 24.
You figured your tax using Schedule D (Form 1041), line 27 of Schedule D is greater than zero, and line 43 of Schedule D is less than line 44.
You figured your tax using the Schedule D Tax Worksheet (in the Schedule D (Form 1040) instructions), line 18 of the Schedule D Tax Worksheet is greater than zero, and line 45 of the Schedule D Tax Worksheet is less than line 46.
You figured your tax using the Schedule D Tax Worksheet (in the Schedule D (Form 1041) instructions), line 17a of the Schedule D Tax Worksheet is greater than zero, and line 42 of the Schedule D Tax Worksheet is less than line 43.

Adjustment exception. If you qualify for the adjustment exception, you can elect not to adjust your foreign source qualified dividends. You make this election by not adjusting these dividends or your foreign capital gains (or losses). If you make this election, you must elect not to adjust any of your foreign source qualified dividends.

You qualify for the adjustment exception if you meet both of the following requirements.

Line 5 of the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions or line 18 of the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions is less than or equal to:

a. $394,600 if married filing jointly or qualifying surviving spouse,

b. $197,300 if married filing separately,

c. $197,300 if single, or d. $197,300 if head of household. 2. The amount of your foreign source net capital gain plus the amount of your foreign source qualified dividends is less than $20,000.

For trusts and estates, see section 904(b) and the regulations issued under that Code section to determine if you qualify for the adjustment exception.

You figured your tax using the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions and (a) line 3 of that worksheet is zero or less, (b) line 5 of

If you are subject to the AMT, see the special rules in Regulations section 1.904(b)-1(b)(3).

Note: Your foreign source net capital gain is the excess of your net long-term capital gain from foreign sources over your net short-term capital loss from foreign sources. Ignore any long-term capital gains you elected to include on Form 4952, line 4g, in determining your foreign source net capital gain. Ignore any qualified dividends you elected to include on Form 4952, line 4g, in determining the amount of your foreign source qualified dividends.

How to make adjustments. To adjust your foreign source qualified dividends, multiply your foreign source qualified dividends in each separate category by 0.4054 if the foreign source qualified dividends are taxed at a rate of 15%, and by 0.5405 if they are taxed at a 20% rate. Include the results on line 1a of the applicable Form 1116.

You adjust your foreign source qualified dividends taxed at the 0% rate by not including them on line 1a.

Caution: Don’t adjust the amount of any foreign source qualified dividends that you elected to include on Form 4952, line 4g.

No adjustment required. If you aren’t required to adjust your foreign source qualified dividends (or you qualify for the adjustment exception and elect not to adjust these dividends), include on line 1a of Form 1116 the full amount of foreign source qualified dividends without adjustment.

Adjustments to foreign capital gains and losses. You must use Worksheet A, Worksheet B, or the instructions under Capital Gains and Losses in Pub. 514 to determine the adjustments you must make to your foreign capital gains or losses. Read the instructions that follow to see if you qualify to use Worksheet A or Worksheet B. If you don’t qualify to use Worksheet A or Worksheet B, use the instructions under Capital Gains and Losses in Pub. 514 to determine the adjustments you must make.

Caution: Before you complete Worksheet A or Worksheet B, you must reduce each foreign source long-term capital gain by the amount of that gain you elected to include on Form 4952, line 4g. The gain you elected to include on Form 4952, line 4g, must be entered directly on line 1a of the applicable Form 1116 without adjustment.

Worksheet A. You can use Worksheet A to determine the adjustments you must make to your foreign source capital gains or losses if you have foreign source capital gains or losses in no more than two separate categories and any of the following apply.

You qualify for the adjustment exception discussed earlier under Adjustments to foreign qualified dividends under Schedule D Filers and you didn’t make any adjustments to your foreign qualified dividends (if any).
Line 15 or 16 of Schedule D (Form 1040) (line 18a or 19 of Schedule D (Form 1041)) is zero or a loss.

10 Instructions for Form 1116 (2025)

that worksheet is zero, or (c) line 23 of that worksheet is equal to or greater than line 24.

You figured your tax using Schedule D (Form 1041) and (a) line 27 of Schedule D is zero; (b) line 22 of Schedule D minus the amount on Form 4952, line 4e, that you elected to include on Form 4952, line 4g, is zero or less; or (c) line 43 is equal to or greater than line 44.
You figured your tax using the Schedule D Tax Worksheet (in the Schedule D (Form 1040) instructions) and (a) line 18 is zero, (b) line 9 is zero or less, or (c) line 45 is equal to or greater than line 46.
You figured your tax using the Schedule D Tax Worksheet (in the Schedule D (Form 1041) instructions) and (a) line 17a is zero, (b) line 9 is zero or less, or (c) line 42 is equal to or greater than line 43.

Complete Worksheet A only once, even if you have capital gains or losses in two separate categories. Keep the completed Worksheet A for your records. Don’t file Worksheet A with your tax return.

Capital losses are deductible only up to $3,000 ($1,500 if married filing separately) of ordinary income.

Worksheet B. If you don’t qualify to use Worksheet A, use Worksheet B to determine the adjustments you must make to your foreign source capital gains or losses if:

You have foreign source capital gains or losses in no more than two separate categories,
You didn’t complete the Unrecaptured Section 1250 Gain Worksheet or the 28% Rate Gain Worksheet in the Schedule D instructions, and
You don’t have any capital gains taxed at a rate of 0% or 20%. Complete Worksheet B only once, even if you have capital gains or losses in two separate categories. Keep the completed Worksheet B for your records. Don’t file Worksheet B with your tax return.

Capital losses are deductible only up to $3,000 ($1,500 if married filing separately) of ordinary income.