Part II. Form 1116 Foreign Taxes Paid or Accrued

Taxpayers may choose to take the foreign tax credit for their Puerto Rico taxes in the year those taxes were paid or accrued.

• If they claim the foreign tax credit the year for taxes paid during the year, then they can claim 2025 payments and withholdings of taxes to the Puerto Rico government as foreign taxes paid. Additional taxes owed to the Puerto Rico government for that tax year are not included.

• If they claim the foreign tax credit for taxes accrued during the year, then they can claim their entire Puerto Rico tax liability as of December 31 (Total Tax Determined on Form 482 Puerto Rico Individual Income Tax Return) as foreign taxes accrued. regardless of when the taxes are paid. Once the accrued method is chosen, the accrued method must be used on all future returns.

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Figuring the Credit