Whenever I make a change to my AGI, the Foreign Tax Credit on Schedule 3 lines 1 & 7 changes to the amount of taxes due. This amount is not equal to the amount I paid in Foreign Taxes. Is this a bug, or have I entered something incorrectly?
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@garyincolorado , what is the foreign tax credit for - passive earnings ( like interest, dividend, rental income etc. ) or active ( wages, self-employment... etc. )? Which country are you talking about ? Is your tax home in the USA or are abroad? All of these things make a difference.
Generally while the foreign tax credit may be recognized in full, he actual allowed for the current year depends on a ratio essentially of foreign income to world income ( actually tax contribution of based ). The unallowed amount can be carried back 1 year and forward 10 years. So if your world income is larger than foreign income then your allowed credit for the year will not be the same as foreign taxes paid.
Does that make sense? Is there more I can do for you ?
Thank you for your explanation. This is the first year where my Foreign Tax Credit (US) was less than the total taxes paid (to Canada.)
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