Deductions & credits

All right, let's try again. 

Yes, the non-excluded part of FEI is eligible so let's look at the 1116. I have gone through and entered foreign income in excess of the allowed amount on form 2555. I have entered 3 countries on Form 1116. My 1116 shows the income from each country and tax paid. Of course line 3e shows the total of all income in my return. The credit is based on your ratio to worldwide income. 

I understand that you have 2 countries coming from the 2555 and that is causing your problem.  I tried not linking the worksheet and that seemed to help in my case. I suggest you not allow the link from the 2555 to the 1116. While I managed 3 countries on one 1116, that does fight with the math. 

Follow these steps:

1. Make 2 form 1116s, one for each country to avoid the math fight. I ended up adding another 1116 as branch income, let it start the work, then went to forms and changed it to General Activity. The program held the 2 copies of 1116 using one activity. You have to start the second copy as something besides general activity for it to hold. 
2. Line 1a, enter the unexcluded income for country 1
3. Line 3d - manually enter the portion attributable to country A of gross foreign source income- per 1116 instructions.
4. Line 12 - the disallowed tax will need to be calculated. It is the foreign tax times the excluded income divided by total foreign income.

Remember, the goal is to get the correct tax value and allow you to e-file. If the IRS asks, you have all the proof. for the correct calculations. Everything is best done on the 1116 comp wks. Actually, the more you can do on the worksheet the better. The worksheet does not go to the IRS while the 1116 does. An override on a worksheet does not have the same weight as on a form.

Finally, if everything fails. you can report all the income as various and do one form with all the math. Just be sure that the total foreign tax paid and total net foreign income are correct. The IRS knows these amounts usually.

Of course, you can delay filing to see if further changes are implemented. 

[Edit line 3d 1/29/2026; 8:17 am PST]