It is not automatic. When you entered the income, the tax was generated. But the offsetting credit won't show up until you get to the credits section and go through the foreign tax credit questions. See the instructions below to enter the credit. Here's what you do:
- Make sure you've entered all your foreign income.
- From within your return, search for foreign tax credit and select the Jump to link in the search results.
- Click Continue and follow the instructions. You have to type it exactly as you see it for the link to work.
In most cases, taking the credit works out better than the deduction. We'll help you decide which one's best for you when you go through this section.
If you choose to take the credit (most people do), we'll attach Form 1116, Foreign Tax Credit if your situation requires it.
Note: You won't be able to take a credit or deduction for taxes paid (or accrued) on excluded foreign earned income or housing. This is because excluded income and housing isn't taxed in the first place.
