Form 8689 MS 2024-2025

Form 8689 MS: What You Should Know

The form is also called an allocation form because taxes are allocated to the specific Virgin Islands territory each taxpayer owns. Taxpayers can claim tax credits or deductions based on allocating income to various locations. It can be useful if you want to include income earned in the Virgin Islands in determining a portion of your U.S. income. However, some taxpayers choose not to have the allocation process performed, and they can choose to report income as if they earned the income on the mainland. See the Instructions on how to use Form 8689 Part IV. For more information on how to use Form 8689 see the section entitled tax Filing Information for Puerto Rico. Taxes paid to the U.S. Virgin Islands include: state and local income taxes, Medicare taxes (and premiums), Social Security taxes, and unemployment taxes. If you lived outside the U.S. Virgin Islands in 2008, see the FAQs regarding your tax status. Form 8689 Part IV. Form 8689 Part IV shows the following information: If you did not meet the residency requirement of living and working in the Virgin Islands, do not include income reported in 2025 on your Form 8689, Part IV. You are not considered U.S. citizens or resident aliens for 2025 if there is any U.S. citizen or resident alien claiming the earned income exclusion, social security tax exclusion, or American opportunity tax credit. This includes: (1) nonresident aliens admitted to the U.S. for employment or for permanent residence to whom U.S. income tax has been withheld or (2) employees, officers, directors, trustees, and similar business agents who are U.S. citizens or resident aliens and who perform services that are performed solely in the U.S. Virgin Islands. If you claim an exclusion or the American opportunity tax credit, you can include the portion of your Social Security tax for 2025 attributable to income in the U.S. Virgin Islands. Do not include this amount on your Form 8689, Part IV. If you claim a refundable credit for the American opportunity tax credit, you do not have to allocate income on Form 8689, Part IV. However, you should include any foreign earned income included on Form 8861 with a tax credit claim on Form 8889, American Opportunity Credit (Form 8489). If you have other income from sources in the U.S. Virgin Islands, this includes your home office rental income.

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