Investing abroad can make you rich. But there are also traps for those who aren't familiar with the way international investing works. The foreign tax credit is one way that investors can get back money they have to pay to foreign governments in tax for their investment income.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at how the foreign tax credit works. Dan notes that many countries have tax treaties that make owning foreign stocks similar to owning U.S. stocks for tax purposes. But other countries don't have those provisions in a tax treaty, and so shareholders in France's Total (NYSE:TOT), Spain's Telefonica (NYSE:TEF), and other dividend-paying stocks around the world need to know what they've paid and how to get it back. Dan points out that the IRS has made it easier to claim a foreign tax credit lately, no longer requiring Form 1116 if your tax-reporting 1099s from your broker include foreign tax amounts and meet all the necessary requirements. Dan concludes that even though foreign investing can be lucrative, it pays to know these rules to get the maximum tax break.
Get dividend stocks closer to home
One of the secrets that few finance professionals will reveal is the fact that dividend stocks as a group handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.
Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Total. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.