@tuxedorose , you appear to have two posts around the same subject. My comments on the situation is as follows :
(a) Generally Foreign Tax Credit ( FTC ) is more efficient in reducing Federal tax liability ( exact facts and circumstances will dictate actual benefit )
(b) Deduction is limited by SALT -- Itemized deduction under State And Local Taxes
(c) Safe harbor amount ( US300 per filer i.e. US$600 for a joint return ) often is more efficient then using form 1116.
(d) Form 1116 while recognizing the foreign taxes paid ( dollar for dollar ) , limits the allowable FTC to lesser of actual amount paid and US tax on the same doubly taxed income. Note that what it is trying to do is to reduce double taxation by giving you zero US tax on the doubly taxed income. A corollary / side-effect of this is often while your accumulated FTC plus current FTC may get higher and higher, your allowable FTC is limited to US tax on the foreign income. It is an asymptotic situation.
(e) A great reading material on un-used FTC or unused deduction is below, especially 1.904.2.(c).3
--> 26 CFR § 1.904-2 - Carryback and carryover of unused foreign tax. | Electronic Code of Federal Regul...
Note that this FTC/ Deduction is ONLY available if , and only if , US and that foreign country has a tax treaty in effect and also the double taxation clause in effect.
Is there more i can do for you ?
