TurboTax Desktop Won't Generate Form 1116

Forum|Forum|5 months ago
March 29, 2026
7 replies
549 views

Hi - I paid $2K+ foreign taxes on a rental property in Canada but don't owe any US taxes given depreciation expense brings gross income negative on the rental property. That said, I should be able to carryforward the $2K into future years but TurboTax Desktop Premier won't allow me to create Form 1116 to track the carryover. I was able to generate the report in 2024 version despite having the same situation so is this some sort of bug in the 2025 version?

pk_

Level 15

@careful_dragonfruit , pardon my slow-uptake.

(a) Are you saying that you rent out a property in Canada and paid taxes on income of US$2000 ?

(b) Or are you saying that while you reported this rental income on Schedule-E with your US return (form 1040), and tried to claim Foreign Tax Credit for US$2000 paid to Canada, there was no form 1116 opened because of zero tax liability even with the Schedule-E income ---- FTC being limited by being Non-Refundable Credit?

Please could you explain the situation --please

careful_dragonfruitAuthor

Level 2

Hi - I paid $2K+ in foreign taxes to the Canadian government for a rental property I have in Canada. Gross income is higher than that- Canada has a withholding tax of 20-25% so gross income would be higher. I don't show depreciation expense in Canada; however the US requires depreciation to be recognized per a 30 year life for the property. As a result, my US net income on the property is negative so I have no US tax liability. TurboTax seems to interpret this scenario as if I don't need a Form 1116 but I think I do to show the $2K in foreign taxes paid being carried over for use in future years. Let me know if that helps clarify?

pk_

Level 15

@careful_dragonfruit , the availability of Foreign Tax Credit is based on "Double Taxation". In your particular case, your foreign source income is negative and therefore US tax thereon is zero. The fact that Canada under its tax laws taxes you does not change the fact that there is NO double taxation. Thus there is no "foreign tax" to be dealt with here . Please see the article XXIV of the tax treaty and the Technical Explanation thereof -->

CANADAWEB.PDF

canatech.pdf

and Technical Explanation, Protocol amending U.S.-Canada Income Tax Convention, signed 21 Sept. 2007

Is there more I can do for you ?