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How does TT calculate the Foreign Tax Credit: Qual Div

Forum|Forum|4 years ago
March 4, 2022
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Best answer by DaveF1006

When this happens, it is usually because Your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources.

When this ratio of foreign income to world income is applied, the actual credit may greatly reduced.

Whatever is not claimed this year, you may have a foreign tax carryover, which means You can carry back for one year and then carry forward for 10 years the unused foreign tax.

Please read this IRS source document on how to figure the foreign tax credit.

@CMajoy

DawnC

Employee

TurboTax calculates it as per the IRS instructions, and it depends on whether or not you have to file a Schedule D. If you have foreign source qualified dividends or foreign source capital gains (including any foreign source capital gain distributions) or losses, you may be required to make certain adjustments to those amounts before taking them into account on line 1a (gross income) or line 5 (losses) of Form 1116, Foreign Tax Credit.

If you completed the Qualified Dividends and Capital Gain Tax Worksheet in the Instructions for Form 1040, and aren't required to file Schedule D, see Qualified Dividends and Capital Gain Tax Worksheet (Individuals) next to determine the adjustments you may be required to make.

If you are required to file Schedule D, see Schedule D Filers, later, to determine the adjustments you may be required to make.

You can elect not to make the adjustments to your qualified dividends and capital gains if you qualify for the adjustment exception. See Adjustment exception under Qualified Dividends and Capital Gain Tax Worksheet (Individuals) and Schedule D Filers, later.

Foreign Tax Credit Compliance Tips

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C

CMajorAuthor

Thanks, but why does TT calculate only "at least" $, and not the actual $? They have all my information.