How do I categorize Fgn Div Tax: in my IRA?

Question

It's currently uncategorized and the notation is in the memo line. Thank you in advance for your consideration.

Regentrude · Answer

Other then a margin expense (which I use as a crutch), there is not expense one can use in an IRA.

Even my 401k account has a MiscExpense, where I can record Foreign Taxes or ADR fees.

And yes it matters. May be I should replace some of the investments where I pay foreign taxes with something else more efficient. Unless I have the numbers, I can't make an informed decision.

mbienert · Answer

Wow, that is incredibly useful information to have. I’m afraid I am the ignorant one here. Hence the question perhaps. You raise excellent points. I think I will just post it as a journal entry? It’s really just my OCD wanting everything to be just so. Sounds like at the end of the day it doesn’t really matter, only to me. In any case, thank you again for your help and your insights. They’re very useful.

jacobs · Answer

Perhaps I'm just ignorant of the implications of foreign tax paid in an IRA account, so can I ask: why does it matter? Any dividends/gains in an IRA account are non-taxable, because you pay taxes on the amounts you eventually withdraw from the account. So there's no tax deduction or credit for foreign taxes in an IRA account, because you can't get a deduction or credit from dividends you aren't being taxed on. (For this reason, I've thought that holding foreign stocks are somewhat disadvantageous in a tax-deferred account, because foreign taxes are taken out of your dividends but you don't get a tax credit to get that money back as you would in a taxable account).