I had interest income in my country's bank (foreign bank for the purpose of US taxation) account on which taxes were deducted at source at the rate of 30% during 2017. I would be filing tax return this year in my country and I would be getting all the money (30%) return back as part of tax return in my country taxation. Since i would be getting my money back anyway should i still get the tax credit in US taxation this year since i already paid the tax on the interest and show it as income in the next year or is it ok to not complicate the US tax and rather just show complete interest income (including the tax that are already paid to my country) in the US tax?
All your replies are appreciated!
Report all the foreign interest earned on your US tax return and do not take a credit or deduction for the foreign taxes as you will be reimbursed by the foreign country for the taxes paid. Anytime you are expecting to be reimbursed for taxes paid, or any other deductible expenses for that matter, there is no need to claim a tax credit or deduction on your tax return. This applies even if the reimbursement is in a different tax year.
Credit and deductions apply when you incurred an expense and you were not reimbursed by either an employer, insurance company, or in your case, another country.