Yes, the program knows the 2555 is off limits since it can't be used to claim the foreign tax credit. The rules are:
- legal liability to the US on the income (income that is excluded from US tax is not allowed in the calculation)
- tax was paid in 2025
- actual income tax
- If all true, then you are allowed to claim the foreign tax credit. If the income credit is over $300/$600MFJ, then Form 1116 must be filled in.
- In addition, the credit is limited to the lesser of actual foreign tax paid or the US tax liability on the foreign income.
You do get to choose within limits, how you want the income and taxes listed. The goal is to get the correct credit on your return- even if it prevents filing. I hate to ask you to review your entries - maybe one more time since E-filing is preferred: but, the IRS does take paper.
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