1998 Tax Guide: Foreign Tax Changes

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Chapter 1
Foreign Taxes and Income
The Current Scene

1998 Tax Guide

Simplified Foreign Tax Credit Limitation for Individuals Will Go into

Important!

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Effect. Beginning in 1998, individuals with no more than $300 ($600 if married filing jointly) of creditable foreign taxes and no foreign source income other than passive income, will be able to claim a credit for those taxes without regard to the foreign tax credit limitation rules. An electing individual meeting certain documentation requirements would report the foreign tax credit directly on Form 1040 and would no longer be required to file a Form 1116 with his or her individual income tax return.

The Foreign Earned Income Exclusion Goes Up. The ceiling on the exemption from U.S. tax for foreign earned income derived by certain U.S. citizens or resident aliens working in a foreign country will increase beginning in 1998. The ceiling for 1998 is $72,000; it will rise to $80,000 in increments of $2,000 per year. For 2008 and later years, the $80,000 amount will be indexed for inflation.

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