No. of Recommendations: 4
This really isn't anything new. Foreign taxes and IRAs have been this way for decades.

And I'm not entirely sure I see a problem here. A non-US corporation with a US shareholder has always resulted in two taxes - taxes are paid to both the foreign country and to the US. The exact amount of those taxes are generally set by a tax treaty between the two countries.

With foreign stock in an ordinary account, the foreign country gets their tax cut withheld from any dividends (most of the time that tax is 15% if we have a tax treaty and 30% if we don't, but there are plenty of exceptions and differences). Then on your US tax return, you can either claim an itemized deduction for the foreign taxes, or claim a credit. Most of the time the credit is the better choice, but not always.

With the foreign stock in your IRA, you effectively get only the deduction (not the credit), and you don't have to itemize to get that deduction. There is simply less money there to withdraw, so your US taxes are less.

If you don't like that result, the solution is simple. Don't hold foreign stocks in your IRA. Hold them in your ordinary brokerage account instead where you can get the benefit of the foreign tax credit.

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