pk
Level 15
Level 15

Deductions & credits

@RJG0307 , Great news . 

Hope you have also been told  that sometimes it is better  ( in the longer term ) to recognize a smaller  foreign tax to be able to use the safe harbor than recognizing the full amount  and having to use the form 1116 limitations.  For example ,

1. US income 120,000, Foreign  dividend income 10,000

2. Filing MFJ

3. Foreign Tax on dividend 1000

 

This would result in foreign tax credit of US$600  using safe harbor i.e. recognizing only $600 as foreign taxes paid. However  if you  you recognize the whole foreign  taxes paid as $1000, the allowable may be  be less than  10,000 / 120,000  times the total tax on world income i.e. 7.6% of the tax on 130,000  approx.  Thus while the foreign tax is recognized in full, the allowable amount for the current year will be limited and the rest of the credit may be carried forward ( as long there is foreign income in the forward years and again limited by the foreign income to world income ratio. 

That is my three cents.