General Limited Income is a category of foreign‑source income used on Form 1116 for the Foreign Tax Credit. It includes active‑type foreign income that does not fall into any of the following categories:
- Passive income
- Section 901(j) income
- Treaty‑resourced income
- Lump‑sum distribution income
✅ What types of income belong in General Limited Income?
The IRS defines General Limited (General Category) income as a catch‑all bucket for most active foreign earnings that do not fit into the more specific categories.
Report income in this section if it includes:
1. Foreign Wages, Salary, or Overseas Allowances
Foreign compensation for work performed abroad that is NOT excluded under the Foreign Earned Income Exclusion (FEIE).
2. Income Earned in a Trade or Business
This includes income earned through active business operations abroad, such as:
- Self‑employment income earned from working in a foreign country
- Service‑based income from professional activities performed overseas
3. Gains From Business Activities
Including:
- Gains from the sale of inventory in a foreign country
- Gains from selling depreciable business property used in a trade or business abroad
4. Highly Taxed Passive Income
Passive income (interest, dividends, etc.) becomes “Highly Taxed” if the foreign tax rate exceeds the U.S. rate—causing it to shift into the General Limited Income basket.
Example: If interest income is taxed at 45% foreign vs. 30% U.S., it is treated as General Limited Income.
5. Other Active Foreign Earnings
General Category Income broadly includes “active” income such as:
- Wages or service fees performed overseas
- Profits from selling goods abroad
- Active income generated by materially participating in business operations
✅ What Should NOT Be Reported Here
Do not enter the following in this section (these have their own categories and require their own Form 1116):
- Passive category income (dividends, interest, rents, royalties, annuities, investment gains)
- Foreign branch income
- Section 951A (GILTI) income
- Section 901(j) income
- Treaty‑resourced income
- Lump‑sum distributions
✅ Program Navigation (Where to Enter)
To report General Limited Income in TaxSlayer:
Federal → Deductions → Select My Forms → Credits → Foreign Tax Credit → Form 1116 → General Limited Income
(Note: “Date Paid / Date Accrued” refers to the date the foreign taxes were paid or accrued and is required.)