Deductions & credits

Regarding non-dividend income, specifically capital gains, here is the key part in the IRS documentation regarding not needing to file 1116: "Capital gains not related to the active conduct of a trade or business are also generally passive income."  This indicates to me that cap gains from buying and selling shares of a foreign fund/ETF are passive income, and as long as you paid <$300 in foreign taxes you're good not to file a 1116.  If the capital gain is related to your business or work, apparently it's non-passive. 

This does make it easy for most of us paying <$300 in foreign taxes. On the TT version 2 weeks ago I ticked the foreign income description as "other" because I had both cap gains and dividends.  This locked me into a partially filled out form 1116.  And yes I went over all 3 1099-DIVs I had and meticulously added up all the foreign gains-oy.  Then when I started to realize I might need the 1116,  I tried changing the income description to "dividend"-- but the 1116 would not go away.  So I deleted the whole return and started over.  The latest version just tells me I can file without the 1116 and it does not ask for a description of the income besides if it's on a 1099-DIV.  It makes no mention of non-passive gains.  So it works for most of us now. If you need to file a 1116, hopefully that's solved 3/3-I say good luck but don't hold your breath.  Now it turns out things are improving, but....the whole experience has been frustrating, time-consuming and very slow.  I wonder if HR Block software has found this issue so vexing.  To fully understand this whole thing, I had to read/research the tax code and look up terms for hours.  For you guys that really need the update due out 3/3 I say good luck but don't hold   your breath.  The K-1 experience was just as bad.