Section 901(j) income refers to income earned in (or derived from) certain sanctioned countries for which the United States does not allow a foreign tax credit. A credit is not permitted for foreign taxes paid or accrued to these specific countries.
Because income from each sanctioned country is treated separately, you must file a separate Form 1116 for every sanctioned country from which you earned income.
✅ What Types of Items to Report in This Section
Report income here only if it meets all the following criteria:
1. You earned income from a sanctioned country
Section 901(j) applies to countries for which the U.S. has imposed restrictions on allowing foreign tax credits. Any wages, business income, interest, dividends, rents, or other income sourced to a sanctioned country belongs in this category.
2. You paid or accrued foreign taxes to that sanctioned country
Even if you paid foreign tax on that income, the U.S. does not allow a foreign tax credit for those payments. Instead, the income must be separated into its own category.
3. Income is tied specifically to each sanctioned country
If you earned income from multiple sanctioned countries, each one must be reported on its own separate Form 1116.
✅ Additional Notes
If the country is no longer sanctioned at year‑end
If the country’s sanction status changes and it is not considered a sanctioned country at the end of the tax year, refer to IRS Pub. 514 for guidance on how to compute the credit.
Foreign tax credit is generally disallowed
Because taxes paid to sanctioned countries cannot be credited, you may need to evaluate whether the taxes can be deducted instead (e.g., as an itemized deduction).
✅ Where to Enter in the Program
To report Section 901(j) Income:
Federal → Deductions → Select My Forms → Credits → Foreign Tax Credit → Form 1116 → Section 901(j) income