The Foreign Tax Credit calculation is tricky. This is how it is determined. Your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. This would be the income that is in excess of your exclusion. The denominator is your total taxable income from U.S. and foreign sources.
When this ratio of foreign income to world income is applied, the actual credit may greatly reduced. Also, if you weren't able to claim the full Foreign Tax Credit this year, you can carry back for one year and then carry forward for 10 years the unused foreign tax.
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