Foreign tax credit for state (California)

homerun · Post by **homerun** » Mon Apr 05, 2010 2:41 am

Hi All,
I've been searching for the past 3 days but couldn't get an official answer. I was able to claim a "foreign tax credit" using form 1116 on my 1040 but couldn't find a similar credit / deduction for California state tax (Form 540). I'm filing as a resident for 2009.

I found a presentation here - http://internationaloffice.berkeley.edu/multiple_use/ca_non_res.ppt that says California does not allow this credit. Does this mean that the state would double tax me on the interest ?

I'm hoping many of the members here have been in a similar situation. What does your state law say about this.

Thanks
Jay

r2i_007 · Post by **r2i_007** » Fri May 14, 2010 12:02 pm

I am no expert on this but as I understand CA does not exclude foreign earned income. You will be taxed only on the portion earned in CA but the total worldwide income will be taken into account to determine the tax rate. This is for FEI exclusion. I am not sure about foreign tax paid credit. If you were physically in CA for a certain number of days in a year, you should be able to file 540NR.

v_sri100 · Post by **v_sri100** » Sat Feb 05, 2011 8:00 am

Wondering if anybody else had done more research on this topic.

I'm USC. Assuming a LTCG for sale of property in India (20% tax), I calculated federal foreign tax credit using form 1116 but still my federal tax has gone up ( not a huge amount ~ $500 ) but my state tax (CA) has gone up whopping ~5K. Looks like CA is still dual taxing that foreign income..Any ideas on reducing state tax ?