Printable Form 2026

IRS Form 965 (Schedule H) – IRS Form, Instructions, Pubs 2026

IRS Form 965 (Schedule H) – If you’re a U.S. taxpayer with foreign investments, pass-through entities, or deferred foreign income under Section 965, understanding IRS Form 965 Schedule H is essential for proper foreign tax credit (FTC) reporting and avoiding disallowed credits. This schedule specifically handles amounts reported on Forms 1116 and 1118 and calculates disallowed foreign taxes under Section 965(g).

The latest version (Rev. December 2020) remains the current form for relevant filings. Download it directly here: https://www.irs.gov/pub/irs-pdf/f965sh.pdf.

This comprehensive guide draws exclusively from official IRS sources, including the Form 965 instructions (Rev. January 2021), the Section 965 transition tax page, and the form itself.

What Is IRS Form 965 Schedule H?

Form 965 Schedule H — officially titled “Amounts Reported on Forms 1116 and 1118 and Disallowed Foreign Taxes” — is an attachment to Form 965 (Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System).

It reports:

  • Section 965(a) inclusions flowing through pass-through entities (partnerships, S corporations, or other pass-throughs that are U.S. shareholders of deferred foreign income corporations or DFICs).
  • The corresponding Section 965(c) deduction.
  • Foreign taxes deemed paid (for corporate filers claiming credits under Section 960).
  • The portion of those foreign taxes disallowed under Section 965(g).

Key context: Section 965 imposed a one-time transition tax on untaxed post-1986 foreign earnings of specified foreign corporations (SFCs), effective for the last tax year of the SFC beginning before January 1, 2018 (typically 2017 for calendar-year entities). While the main inclusion occurred on 2017/2018 returns, Schedule H is used in later years (including 2020 tax years and beyond for certain pass-through flows, amendments, or late filings) to properly allocate amounts for FTC purposes on Form 1116 (individuals, estates, trusts) or Form 1118 (corporations).

Note: As of 2026, the IRS marks Form 965-related pages as historical with no recent updates, but the form and schedule remain required for compliance, amended returns, streamlined filing procedures involving Section 965, or pass-through inclusions.

Who Must File Schedule H (Form 965)?

You must complete and attach Schedule H if you are:

  • A U.S. person required to include Section 965(a) amounts in your 2020 (or applicable) tax year through a pass-through entity (domestic partnership, S corporation, or other pass-through) that is a U.S. shareholder of a DFIC.
  • Claiming (or potentially claiming) deemed-paid foreign tax credits under Sections 901, 902 (pre-2018), or 960.
  • A pass-through entity itself whose owners/beneficiaries may claim deemed-paid credits.
  • Reporting disallowed foreign taxes on distributions of Section 965 previously taxed earnings and profits (PTEP), even if you cannot claim credits.

Exceptions:

  • Tax-exempt organizations (Section 501(a)) only if the amounts are subject to tax under Section 511 or 4940.
  • Filers with no pass-through Section 965 inclusions typically skip it.

Complete a separate Schedule H for each separate category of income (e.g., general category, passive category). See Instructions for Form 1116 or 1118 for category codes.

Purpose of Schedule H in the Section 965 Transition Tax

The transition tax under Section 965 required U.S. shareholders to include previously deferred foreign earnings as if repatriated. Section 965(g) disallows a portion of foreign tax credits (and deemed-paid credits) attributable to the inclusion to prevent double benefits.

Schedule H ensures:

  • Proper reporting of the inclusion and deduction on your FTC forms.
  • Accurate disallowance of foreign taxes.
  • Compliance when credits flow through pass-through entities.

It ties directly into:

  • Form 1116, Part I or Form 1118, Schedule A (for the 965(a) inclusion and 965(c) deduction).
  • Form 1118, Schedule B, Part I, column 3 (deemed-paid taxes).
  • Form 1118, Schedule G (disallowed taxes).
  • Form 5471 (for controlled foreign corporations, regarding PTEP distributions).

Line-by-Line Guide to Completing Schedule H (Form 965)

The form is concise (one page) with many lines reserved for 2020+ use. Here’s the breakdown based on official instructions:

Header & Lines a–b:

  • Line a: Enter the separate category code (e.g., from Instructions for Form 1116/1118).
  • Line b: If code “901j” (sanctioned country), enter the two-letter country code (IRS.gov/CountryCodes). For multiple countries, file separate schedules and attach.

Section 1 — Amounts Reported on Forms 1116 and 1118 and Disallowed Foreign Taxes:

  • Lines 1, 2, 4, 5, 7, 8, 10, 12, 13: Reserved.
  • Line 3: Section 965(a) inclusion (U.S. dollars) from pass-throughs. Pull from Schedule F (Form 965), column (e)(1), line 16. Report this on Form 1116 Part I or Form 1118 Schedule A.
  • Line 6: Section 965(c) deduction from pass-throughs (allocable to the inclusion above). From Form 965 Part II, line 17. Report on Form 1116 Part I or Form 1118 Schedule A.
  • Line 9: Foreign taxes deemed paid through pass-throughs. From Schedule F, column (l), line 16. Report on Form 1118 Schedule B, Part I, column 3. (Skip if you do not complete Schedule F.)
  • Line 11: Applicable percentage for disallowance (from the pass-through entity’s 2018 Form 965 Schedule H, Section 2, line 37 or 46 — disregard any “2019” reference). If multiple pass-throughs, attach a schedule and leave blank.
  • Line 14: Disallowed foreign taxes (attach detailed calculation/schedule by pass-through entity and DFIC). This is the portion of line 9 taxes disallowed under Section 965(g) using the applicable percentage from line 11. Report on Form 1118 Schedule G, Part I, line F.

Pro Tip: If you are a pass-through entity with no credit-eligible owners, still complete lines 3, 6, and 11. Owners use the provided percentages for their own Schedule H.

How Schedule H Affects Forms 1116 and 1118?

  • Individuals/Estates/Trusts (Form 1116): Use line 3 and line 6 amounts in Part I to adjust foreign source income for the FTC limitation.
  • Corporations (Form 1118): Report inclusions/deductions on Schedule A; deemed-paid taxes on Schedule B; disallowed taxes on Schedule G.
  • Disallowed Taxes on PTEP Distributions: Even without claiming credits on the original inclusion, use the applicable percentage (line 11) to disallow credits on later distributions of Section 965 PTEP.

Accurate completion prevents over-claiming credits and ensures compliance during IRS review of international tax filings.

Step-by-Step Filing Process

  1. Determine if you have Section 965(a) inclusions through pass-throughs for the relevant tax year.
  2. Complete Form 965 main form and Schedule F (if claiming deemed-paid credits).
  3. Fill out Schedule H (separate for each category).
  4. Attach to your income tax return (Form 1040, 1120, 1041, etc.) or amended return.
  5. For late or streamlined filings involving Section 965, mark “Section 965” in red at the top of returns and information returns (e.g., Form 5471).
  6. Retain records of calculations, pass-through statements, and applicable percentages.

Common Questions About Form 965 Schedule H

Q: Is Schedule H still required in 2026?
A: Yes, for any open years, amendments, or pass-through flows related to the original transition tax. The IRS continues to enforce Section 965 compliance.

Q: What if I have no deemed-paid credits?
A: You may still need lines 3, 6, and 11 for disallowance on future PTEP distributions and foreign source income calculations.

Q: Where do I find the applicable percentage?
A: From your pass-through entity’s 2018 Form 965 Schedule H (provided to you on a K-1 or statement).

Download Official Resources

Final Advice

Properly completing IRS Form 965 Schedule H ensures accurate foreign tax credit claims, prevents disallowances under Section 965(g), and avoids penalties on international tax reporting. Because rules involve complex pass-through allocations, deemed-paid credits, and category-specific reporting, consult a qualified tax professional or international tax advisor familiar with Section 965.

For the most current filing requirements, always check IRS.gov/Form965 or consult your tax software/provider, as electronic filing may have specific attachment rules.

This article is for informational purposes only and is not tax or legal advice. All information is based on official IRS publications as of February 2026.