topic Foreign tax credit not working in Deductions & credits

Foreign tax credit not working

BobboSRQ — Mon, 16 Feb 2026 20:19:58 GMT

For one of my accounts, I entered the dividends and and foreign taxes paid (it is only $27). When I got to my deductions, Turbotax recognized that I entered foreign taxes on a 1099-DIV. I then answered the 2 questions indicating this was all of my foreign taxes and I had no carryover foreign tax credits. The next screen says I am eligible to take the credit without filling out form 1116 but that I have not entered any foreign taxes paid. But I did enter the foreign tax paid as part of my 1099-DIV. So now I am not getting the credit. Is this an error in Turbotax?

FYI - I brought up my 2024 Turbotax and looked at the same investment from last year. I entered the data exactly the same and answered the questions exactly the same and it did provide the tax credit. What gives for 2025?

Thanks

Re: Foreign tax credit not working

DaveF1006 — Mon, 16 Feb 2026 21:35:56 GMT

Let's trace back over your answers to see if you may have missed something.

Go to Deductions & Credits > Estimates and Other Taxes Paid > Foreign Tax Credit.
Click Continue through the "Already entered?" screens.
When you reach a screen that asks, "Do you want the deduction or the credit?", make sure you select Take a Credit.
You will reach a page that asks, "Does your total taxes paid only include taxes reported on a Form 1099-INT or Form 1099-DIV?"
Select: YES.

If it then says you haven't entered anything, click Back and look for a small checkbox or a "Link" button that asks you to select the 1099-DIV you already entered. You may need to click Edit on that specific 1099 line to ensure the "Foreign Country" is selected (use "RIC" or "Various" if the 1099 doesn't specify a country).

If you successfully link the $27 but the credit still shows as $0, it is likely because of your Total Tax Liability.

The Foreign Tax Credit is non-refundable. This means it can only reduce your tax bill to zero. It cannot give you a "refund" of money you didn't owe. If you had no tax liability, the credit cannot be applied. It can be carried forward for ten years to offset any future foreign income.
In other words, if your other deductions (like the Standard Deduction) already zeroed out your tax liability, TurboTax will show the credit as $0 because there is no tax left for the $27 to offset.

Re: Foreign tax credit not working

BobboSRQ — Mon, 16 Feb 2026 22:41:33 GMT

Thanks for the detailed quick response. My bad 🙁. I am doing taxes for my retired brother-in-law and sister-in-law. They have a very good income, but between the standard deduction, limited taxation of their social security, and the enhanced senior deduction, their tax liability is zero. Hence the foreign tax credit is not applicable. Sorry about overlooking that. Again, thanks for your response.

Re: Foreign tax credit not working

user17737047267 — Tue, 17 Mar 2026 00:07:05 GMT

For 2025: I have a foreign tax credit of $1700. I completed six form 1116's with country name and amount of foreign dividend reported on 1099 div. The total foreign dividend amount is $9500. The program asks me to enter the amount of foreign dividend income, 9500, that is PART of dividend income total reported. When I do that, the program deletes my $1700 foreign tax credit, reducing it to $0. Is there a bug in the program?

Re: Foreign tax credit not working

DaveF1006 — Wed, 18 Mar 2026 14:23:08 GMT

It depends. These are two common reasons why this may have happened.

If your total itemized deductions or standard deduction (plus other adjustments) brings your taxable income to $0 (or very low), you technically owe no U.S. tax. If you owe $0 in U.S. tax, the IRS won't give you a credit for taxes paid to a foreign country because there is no "double taxation" to offset.

Foreign dividends are often "Qualified Dividends," which are taxed at lower rates (0%, 15%, or 20%). If your overall income puts you in the 0% or 10% bracket, your U.S. tax on those dividends might be effectively $0, which zeros out the credit.

Re: Foreign tax credit not working

user17737047267 — Wed, 18 Mar 2026 15:55:37 GMT

Thank you for your response. My taxable income is more than $250,000 above $0.

It seems turbotax did not carry my foreign tax credits from prior years. When I manually entered the numbers, I received the credit. I am aware that a $0 tax amount would result in a $0 foreign tax credit.

Re: Foreign tax credit not working

srveach49 — Thu, 02 Apr 2026 22:18:47 GMT

Not quite the sequence of steps, however, got it done to my satisfaction. Now have a 1116 form to which I had to add the date of distribution, since no Steps required that info.

Done with my taxes, and I owe ONE HALF of TurboTax's initial assessment due to TT importing double forms of DIV and INT in one import.

This has been a nightmare year of tax reporting, cuz I cannot get to the origin of an error in your computations.

I guess that's what I pay for - your computations, my grief.

Much more reasonable taxes due - finally, done, Sharon