Form 1116 Line 3b

  • Thread starter Hank Youngerman
  • Start date

H

Hank Youngerman

Hope I'm not driving anyone mad with my slogging through this form...
but I am learning a lot.

Line 3b of Form 1116 pertains to "Deductions that do not relate to any
specific type of income." "Type of income" means, whether it is
foreign source or not.

I contributed $4,150 last year to a self-employed 401(k) plan. The
income related to this was "definitely" sourced in the USA, as it was
from my one-man consulting business, located entirely in the USA.

Turbotax puts this $4,150 on Line 3b. I think that it doesn't belong
there, since the deduction can be sourced to specific income. Am I
right?

I'm discovering that Form 1116 seems to have a lot of weird effects.
For example, given that I'm in the 28% bracket and not affected by any
funny stuff like deduction/exemption phaseouts, AMT, passive loss
limits, etc., I would expect a $4,150 retirement plan contribution to
reduce my tax by 28% of $4,140. In fact, the difference is more like
17%. OTOH, a quick estimate pertaining to dividends (I don't actually
have all my 1099's yet) suggested a marginal rate on dividends of
about 11.2%, rather than 15%.
 
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A

Andre Gold

Hope I'm not driving anyone mad with my slogging through this form...
but I am learning a lot.

Line 3b of Form 1116 pertains to "Deductions that do not relate to any
specific type of income."  "Type of income" means, whether it is
foreign source or not.

I contributed $4,150 last year to a self-employed 401(k) plan.  The
income related to this was "definitely" sourced in the USA, as it was
from my one-man consulting business, located entirely in the USA.

Turbotax puts this $4,150 on Line 3b.  I think that it doesn't belong
there, since the deduction can be sourced to specific income.  Am I
right?

I'm discovering that Form 1116 seems to have a lot of weird effects.
For example, given that I'm in the 28% bracket and not affected by any
funny stuff like deduction/exemption phaseouts, AMT, passive loss
limits, etc., I would expect a $4,150 retirement plan contribution to
reduce my tax by 28% of $4,140.  In fact, the difference is more like
17%.  OTOH, a quick estimate pertaining to dividends (I don't actually
have all my 1099's yet) suggested a marginal rate on dividends of
about 11.2%, rather than 15%.
When you get the answer do let me know. I have the exact same issue
on line 3b. (1/2 Soc Sec Tax, contribution to IRA, and self employed
Health Insurance which is reported as income)
 

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