1. When I select "Itemized Deduction" and enter the foreign taxes paid, I see my 'Federal tax due' goes down. Then I checked Schedule A form and its shows the foreign taxes paid under 'Other taxes', on form 1040 line 48 is empty. And on the 'Deductions & Credits' summary I see the foreign taxes amount show under 'Other Deductible Expenses'.
Not sure if this is right?
2. When I select "Taking a Credit" and fill Form 1116 , my 'Federal tax due' does not change and instead I get 'Excess Foreign Tax Credit'. I checked 1040 line 48 and its 0, but Form 1116 has the taxes under 'Passive Income' (since its a rental property in Canada)
The fact that option1 brings down my 'federal tax due' tempts me to submit using that option but wherever I read they suggest to select "Taking a credit". Please help me understand whats better and right to do here.
