the long and short of it is, that in the US you only get credit based on the average, not marginal/effective taxes you paid on that foreign income. So while that foreign income might be taxed a 32% in the US when added to all your other income; if on average you paid only 25% in US taxes on your income. you are only going to get a less than a 25% credit on form 1116 because first some of your itemized or standard deduction is used to reduce the foreign income - line 6 of form 1116. Please review it. The rest becomes a carryover. There is also a 1-year carryback if you have foreign income of the same category (general) in the prior year provided you have not already maxed out the FTC in 2022. I have worked on many clients that have huge FTC carryovers because of how the US FTC is calculated.
a made up example
Denmark you paid $4300
US $10000 foreign income is reduced by $500 for standard or itemized deduction net $9500 (form 1116 line 7)
average us tax rate 24% (form 1116 line 20 divided by line 18) times $9500 = about $2300 in FTC
US marginal tax rate 32% on $10000 = $3200
so net US taxes $3200-2300 = $900 + Denmark $4300 = $5200 with a FTC c/o of $2000
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Turbotax is doing the calculation correctly. Your real issue is the US tax laws.
marginal US tax rate 32% so you end up paying
