@Anonymous excellent clarification. thanks
another way to explain the carryover is it's the effective foreign tax rate on net foreign income less the effective federal income tax rate on taxable income. then the net difference is multiplied by net foreign income. so even a 1% higher ft rate on $3000 of net foreign income will generate a $30 carryover
THIS MAKE SENSE. Its very difficult to try to understand the 'intent of the tax' by reverse engineering the calculations on the form ... they should explain the formula better rather than just saying "add line b to line c and divide by c".
basically you are not being penalized for paying a higher tax rate on the foreign income than you would have paid in the US.. so its kind of like a tax equalization to give you that net credit
even net foreign income is somewhat of a misnomer. it's gross foreign income reduced by certain direct expenses + a portion of your standard or itemized deductions and adjustments to income
This completely confused me ... what is the logic of screwing the taxpayer a bit by artificially reducing the foreign income by things like your itemized deductions and charitable contributions??? its relating apples to oranges!
