Assuming that foreign income is taxed in the foreign jurisdiction, which of the following types of income results in foreign tax withholdings that could generate both a tax credit and a tax deduction for individuals?

Question

Quizplus · Accepted Answer

Foreign interest income typically results in foreign tax withholdings, which may be used to generate both a tax credit and a tax deduction for individuals. This is because interest income is typically taxed at the location where the investment is held. Therefore, if an individual earns interest income in a foreign jurisdiction, they may be subject to foreign tax withholdings. These withholdings can then be used to generate a tax credit on their U.S. tax return, while also being deductible on their foreign tax return. Foreign business income and foreign employment income may also result in foreign tax withholdings, but they may not necessarily be eligible for both a tax credit and a tax deduction.

Assuming That Foreign Income Is Taxed in the Foreign Jurisdiction