RetireJapan

Hi all, I realize this is more a question about US taxes, but I wasn't sure where else to ask for help. I'm hoping someone can take a quick look at my numbers to make sure everything adds up. In my case, is the foreign tax credit a good decision, and is it being applied correctly? (amounts rounded for anonymity sake, so things won't add up exactly, but close)

(All adjusted to US$)

Income - Wages
Taxable income after standard deduction is around $16,000.

Child Tax Credit
Nonrefundable child tax credit: $350
Refundable child tax credit: $1,400

Foreign Tax Credit
Amount claimed for taxes paid in Japan: $1,400 (Income tax + city/prefectural tax. Came to Japan the prior year, so taxes were pretty low I think)

Total US Tax Return amount: $1,400

That's about it. Income was wage based only. Does this make sense? I reported my total gross income found on my Japanese tax report, not any amount minus taxes, social insurance, employment insurance, etc. Also, no retirement accounts to take into account.

Thanks!

When I did my own, I did whatever the computer software told me and hoped for the best. The US tax code is so convoluted and cryptic. Sorry I can’t be more helpful but taking the tax credit always seems to be the best option for us.

I think that sounds about right. The usual choice comes down to claiming FEIE, which would erase all of your foreign income but prevent you from getting the child tax credit, or the FTC which allows you to get the refundable child tax credit and in this case also means you don’t owe any US taxes. You could actually even stick some of that money in a Roth IRA if you wanted because you do have earned income but don’t owe US taxes. I can’t be sure because I haven’t seen your return but what you wrote makes sense.