What this line means
Other deductible taxes you paid during the year that do not fit on lines 5a through 5c. The most common item here is foreign income taxes you paid and choose to deduct rather than claim as a credit on Form 1116. Other qualifying taxes include generation-skipping transfer tax on income distributions and certain local taxes not covered by lines 5a-5c.
Does this apply to you?
- You paid foreign income taxes and prefer to deduct them rather than claim the foreign tax credit
- You paid generation-skipping transfer tax imposed on income distributions from a trust
- You paid certain local taxes not based on income, property, or sales that qualify for deduction
Easy to overlook
Foreign tax credit is usually better than a deduction You have a choice: deduct foreign taxes on Schedule A line 6, or claim a dollar-for-dollar credit on Form 1116. The credit is almost always more valuable because it reduces your tax directly, while the deduction only reduces your taxable income. A $1,000 foreign tax gives you a $1,000 credit but only a $220-$370 deduction benefit depending on your bracket. 1 General filing pattern — foreign taxes claimed as deduction vs credit
Foreign taxes from mutual fund 1099-DIVs qualify If your mutual fund or ETF paid foreign taxes (shown in Box 7 of your 1099-DIV), you can claim those taxes either here as a deduction or on Form 1116 as a credit. Many filers with international funds do not realize these foreign taxes are recoverable. 2 IRS Schedule A instructions — Line 6
Watch out for this
Deducting foreign taxes on line 6 when the foreign tax credit on Form 1116 would give a larger tax benefit. The deduction reduces taxable income; the credit reduces tax dollar for dollar. Unless your foreign taxes are very small (under $300 single / $600 MFJ, qualifying for the simplified credit), you should almost always take the credit instead.
Footnotes
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IRS Schedule A (Form 1040) Instructions. See also IRS Publication 17, Your Federal Income Tax. https://www.irs.gov/pub/irs-pdf/p17.pdf ↩
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IRS Schedule A (Form 1040) Instructions, Line 6. https://www.irs.gov/instructions/i1040sca ↩