rogge1772,
Please accept my thanks for answering these questions.
- For 1, I followed your instructions and I do not have many of the income sources mentioned, but I added add all the positive numbers from 1040 as instructed and Schedule 1 and Schedule D - cap gains - positive numbers only and positive numbers only from other income. Still the calculation is about 21K less than TT calculated amount.
- for line 1F the flag for Foreign qualified Dividends ... is checked. You have mentioned 2 forms of calculations. One using Schedule D Tax worksheet and another Qualified Dividends and Capital Gains worksheet. This worksheet exists in my tax return. On what basis does TT choose the method?
I followed instructions for both. In my case 1i and 1j are 0. So the last calculation of 1h applies. I followed the steps. Line 31 is the capital gains taxed at 15% rate and is being multiplied by 0.54045. Schedule D tax worksheet line 28 = 83350 which is the limit for Married filing joint returns below which capital gains are charged at 0% and is being multiplied by 0.4054. This divided by sum of lines 20, 28, 31 which amounts to other income (AGI-net capital gain)+83350+15% capital gains. This ratio comes up as 0.28368. I do not understand the rationale of the calculation, but this ratio does not match the TT calculated rate.
TT calculated ratio matches the second method using Qualified Dividends and Capital Gain Tax worksheet. Line 20 IS 0. So the ratio is 1h = line 17 which is capital gain taxed at 15%. Denominator is line 9 (capital gain taxed at 0%)+ line 17 (capital gain taxed at 15%). This ratio comes to 0.13968.
However, the instructions I pasted from for 1116 say that first – do not include any foreign source qualified dividends which are taxed at 0% rate. Then to adjust multiply 15% capital gains by 0.4054 and 20% by 0.5405. And this is the adjusted value. Using TT calculation all the foreign taxes are being rolled over. Using the instructions from form 1116 (assuming I am understanding the paragraph correctly), some of the foreign tax credit is being utilized this year.
- Thanks for the answer to question 3. That means there is a strong possibility that will lose the tax credits if I do not have major foreign income in subsequent years which is likely.
If you have any recommendations on whether should just let TT do the calculation blindly, but there still is the question of Q 1 where there is a difference of 21K in the calculation, I am all ears.
