Right. Without the foreign tax credit, I'd pay both the ordinary income tax levied by the US (the dividend I received is not qualified) as well as Italy's 26% withholding tax. The foreign tax credit allows me to get a refund for the latter, but (assuming I'm reading the IRS instructions correctly) only to the extent I actually owe the tax. And it appears the US and Italy have a tax treaty that says US residents only owe 15%, not 26%. Since I can theoretically get Italy to refund the 11% difference, the IRS only allows me to claim 15% for the foreign tax credit, not the full 26%. But I can't figure out how to inform TurboTax about this.
