I went back and looked at our 2020 professionally prepared taxes, and they capped tax at $10,000 on form 1116 line 3a too (before adding medical expenses), so maybe that's right. Sure seems like the instructions for form 1116 should spell that out because that's very much NOT what they say to do. I'd love to find an IRS-sourced info point that verifies that's the right thing to do. I saw an article by a guy who used 4 different tax software packages and came up with 3 different values for the foreign tax credit, just confirming it's hella challenging to get right and way too complex to calculate.
