To add to the great response, there is a limit on the amount of the credit that you can claim for a particular tax year. Your foreign tax credit is the amount of foreign tax you paid or accrued or, if smaller, the foreign tax credit limit.
The foreign tax credit limit provides that your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources. If you have foreign taxes available for credit but you cannot use them because of the foreign tax credit limit, you may be able to carry them back to the previous tax year and forward to the next 10 tax years.
