I am using Windows desktop Turbotax Premier 2022.
TT includes gross rental income (no deduction) from Schedule E line 3 for the computation of Gross income form 1116 line 3e but is using net rental income for the computation of taxable income Form 1116 line 18.
Since we use the net rental income (after expenses and depreciation) for input to form 1116 line 1a, this caused a mismatch in the computation of the foreign tax credit and we can't account for 100% of the taxes.
I believe that line 3e should use the net rental income after deductions since this is what the tax for the rental is based on.
Example:
| | | Total income | % of income based on Real total | % of income based on TT total |
| Canadian source | Interest | $ 19,586 | 30% | 28% |
| | Rental minus deduction | $ 2,805 | 4% | 4% |
| | Salary | $ 31,123 | 48% | 44% |
| US source | 401k | $ 11,950 | 18% | 17% |
| | | | 100% | 92% |
| Total | Real total | $ 65,464 | | |
| Total | From Turbotax (not accurate) | $ 71,173 | | |
When calculating the amount of taxes to use for credit on the 401k, the number is wrong because there is only 92% accounted for.
The only way I figured to get the computation correctly and account for 100% of the taxes is to do a Gross Income adjustment in form 1116 Smart Worksheet.
Am I doing something wrong? Could you point me to how I can get 100% of taxes accounted to each income category.
Thanks
