Form 1118 is the form a corporation uses to work out its foreign tax credit for income taxes paid or accrued to foreign countries or U.S. territories. Any corporation that elects the credit under section 901 completes it and attaches it to its income tax return, with a separate set of schedules for each category of foreign income.
Everything here comes from the IRS Instructions for Form 1118 (Rev. December 2025) and the December 2025 Form 1118, as of October 2026. Individuals claiming the credit normally use Form 1116 instead.
Who has to attach Form 1118
| Situation | What's required |
|---|---|
| Corporation elects the foreign tax credit under section 901 | Complete Form 1118 and attach it to the return |
| No credit elected, but any change to an overall foreign loss, overall domestic loss or separate limitation loss account | Schedule A and Schedule J (Form 1118) anyway |
| No credit elected, but a foreign tax redetermination under section 905(c) | Schedule L (Form 1118) for that year, even if U.S. tax didn't change |
| Individual making the section 962 election on CFC income | Form 1118, to claim a credit based on the CFC's foreign taxes |
That last row surprises people: an individual can end up filing the corporate form. It happens when they elect under section 962 to be taxed at corporate rates on their inclusions from a controlled foreign corporation, which is often tied to owning a Form 5471 company.
One Form 1118 per category of income
The credit is worked out category by category, so a separate Schedule A, Schedule B Parts I and II, Schedules C to G and several other schedules are completed for each one. The code goes on line a at the top of page 1.
| Code | Category |
|---|---|
| 951A | Section 951A category income |
| FB | Foreign branch category income |
| PAS | Passive category income |
| GEN | General category income |
| 901j | Section 901(j) income |
| RBT codes | U.S. source income resourced by treaty as foreign source |
Two categories worth understanding first
Section 951A category income is any global intangible low-taxed income (GILTI) included in gross income under section 951A, other than passive category income. Foreign branch category income is the business profits of a U.S. person attributable to one or more qualified business units in foreign countries. When a corporation enters code 901j or an RBT code, it also completes item b or c with the country code from the IRS country code list.
A computer-generated Form 1118 is accepted if it conforms to the IRS version, and software used to produce it must be approved for substitute forms under Pub. 1167.
What the main schedules do
- Schedule A: income or loss before adjustments for each category.
- Schedule B: the total foreign tax credit after certain reductions.
- Schedules C, D and E: taxes deemed paid on section 951(a)(1) inclusions, section 951A inclusions and distributions of previously taxed earnings and profits.
- Schedule G: required reductions of taxes paid, accrued or deemed paid.
- Schedule H: apportioning deductions that can't be tied to one class of income.
- Schedule K: reconciling the prior-year foreign tax carryover.
- Schedule L: foreign tax redeterminations.
What changed for the December 2025 revision
Public Law 119-21, the One Big Beautiful Bill Act, added section 960(d)(4). It disallows a credit for 10% of foreign income taxes paid, accrued or deemed paid on section 959(a) distributions, to the extent the previously taxed earnings were excluded because of a section 951A inclusion in a U.S. shareholder's tax year ending after June 28, 2025. Schedule G has a new line H for that reduction, and Schedule B, Part I, column 2(b) is now split in two so the PTEP code can be reported.
One more reminder from the instructions: Form 1118 isn't used for the corporate alternative minimum tax. Corporations use Form 4626 to work out foreign tax credits for CAMT.
Unused credits: 1 year back, 10 years forward
If the allowable foreign taxes in a category are more than the limitation for that category, the excess is first carried back 1 year, then forward 10 years, always within the same category. It's applied to the earliest year first. To use a carryback, you file an amended return with a revised Form 1118 and schedules, including a revised Schedule K.
The part people miss: these carryover rules don't apply to foreign income taxes assigned to section 951A category income. Excess credits in that basket can't be carried at all.
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Credit or deduction: the timing rule
A corporation chooses each year between crediting foreign income taxes and deducting them. The election to claim the credit can be made or changed at any time before the end of the special 10-year period in section 6511(d)(3). Once the credit is elected for a year, none of that year's foreign income taxes can also be deducted, apart from listed exceptions such as taxes denied under the boycott rules in section 908.
The verdict
Form 1118 rewards corporations that sort their foreign income into the right basket before they touch a number. Get the category codes right, watch the new 10% disallowance on section 951A distributions, and remember that the 951A basket has no carryover safety net. For anything beyond a single, simple category, this is a form for a specialist international tax preparer.
Frequently asked questions
What is Form 1118 used for?
It's used by corporations to compute the foreign tax credit for income taxes paid or accrued to foreign countries or U.S. territories.
Who must file Form 1118?
Any corporation that elects the foreign tax credit under section 901, plus corporations with certain loss account changes or foreign tax redeterminations, and individuals making the section 962 election.
What is the difference between Form 1116 and Form 1118?
Form 1116 is the individual foreign tax credit form; Form 1118 is the corporate version, also used by individuals who make the section 962 election.
How long can unused foreign tax credits be carried?
Excess credits are carried back 1 year and then forward 10 years within the same category, except for section 951A category taxes, which can't be carried.
Is Form 1118 used for the corporate AMT?
No. Corporations use Form 4626 to determine foreign tax credits for the corporate alternative minimum tax.
What changed on Form 1118 for December 2025?
New section 960(d)(4) disallows a credit for 10% of certain foreign taxes on section 959(a) distributions, reported on new Schedule G, line H.
