Hi @jtax, thank you very much for your reply.
I am actually deducting the Schedule E expenses on line 2 of form 1116, and I agree that this is correct. So basically when I mentioned a net rental income of 5k, I was referring the fact that line 1a minus line 2 of form 1116 is already 5k.
However, on top of these expenses, as you know form 1116 requires that I deduct the pro rata share of other deductions not definitely related (line 3), which in my case is only the standard deduction. And that's where the problem arises: the pro rata share is calculated using the gross foreign income (25k instead of 5k), so the foreign income gets allocated a large share of the standard deduction. While I have the impression that this is technically correct, I find it a bit unfair in practice.
