Olduvai wrote:Is any foreign tax withheld from interest payments made by foreign government bonds? Or foreign corporate bonds? Also, does it make sense to own foreign stocks in my IRA, since the foreign taxes withheld aren't deductible inside the IRA?
For most foreign stock funds, the taxes withheld are about 7% of the dividend yield; therefore, you lose 0.14% by not recovering the foreign taxes on a fund with a 2% yield. You would lose more than 0.14% to taxes if you held the fund in a taxable account.
The foreign tax credit is the reason that foreign stock index funds are often the best funds to put in a taxable account if you must put something there. But if you can tax-defer everything, that is certainly better.