How to calculate adjustment is quite straight forward in the instruction, but when this adjustment required? It troubled me couple of days to understand.
It's important to understand "Instructions for Form 1116 (2022)" Page 10 for Schedule D filters.
Everyone has different situation.
For example if someone happens to belong to category:
1. Schedule D Filers
2. Use Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions to calculate tax.
Adjustment needed?
-->Check line 5 of QD/CG TAX worksheet (Taxable income - QD - LTCG(offset by STCG if STCG is negative)), if it is greater than zero and line23<line24, you are required for QD/LTCG adjustment. Adjustment usually required because ordinary income is bigger than deductible for most.
There are some other situations, such as Schedule D Filers with 1041, Schedule D Tax Worksheet etc. check Page 10 Schedule D Filers section carefully.
And pay attention on Adjustment exception if happen to fit.
