How are dividends from ADR's taxed?

[DryIcez33]

I'm living in USA, and looking at buying shares of foreign companies such as GSK or RDS.A
I know dividends are taxed once in the home country and I would assume that I would have to pay taxes on the income. I've google searched this one quite a bit, and I'm having a tough time figuring it out. It appears that the foreign tax may be deductible. Does anyone have any experience with this? I'm really curious if the extra time spent on a tax return is worth the opportunity to invest in foreign companies!

[44deagle]

I have 2 ADR's. They are both taxed in the country they are located in and by the US.

[George the original one]

Unless the ADRs are a significant portion of your income, it's usually not worth the hassle of trying to reclaim the foreign tax (I've looked at the German and Canadian paperwork in the past). Deduction is possible and relatively easy.

[Chris]

Actually, it's better than a deduction: it's a credit. You'll just need to fill one line on the 1040. However, if the amount is over $300 ($600 jointly filed), you need to attach an additional form (1116). Be sure to read the instructions for Form 1116.
In addition to foreign tax, you will also be paying a fee to the ADR administrator. This is usually pretty small, but something you should be aware of.
If your broker offers global trading (such as ETrade), you might consider just buying GSK on the London exchange.

[Concojones]

I suppose, if some Belgian dude like myself wants to buy ADR shares, he's taxed 3 times?

[Kevin M]

Taxed like regular dividends, take the foreign tax credit like Chris said above. Most small investors won't hit the $300 required to file Form 1116 so the extra time on the tax return is minimal.