Possible mistake in TurboTax regarding Oregon foreign income subtraction

[taxeycab]

I agree that what you stated here is what TurboTax does, and it is the incorrect behavior.

"If the amounts are over these thresholds, then the amounts reported part C line 1 reflect the values that are listed in Table 9 of Oregon Pub 17."

That is not what is supposed to be reported in Part C, line 1. The instructions for "Part C: Foreign income tax subtraction" clearly state, "Enter $8,250 ($4,125 if your filing status is married filing separately)."

Can you please explain why TurboTax is using the incorrect value (the federal tax liability, as you've confirmed), instead of the correct value of $8,250 as stated in the instructions?

[DaveF1006]

As I explained before, Turbo Tax is reporting this correctly.  The $8250 will only appear if the income thresholds are below $125,000 or $150,000 if married foiling jointly. Otherwise, the amount in part C line 1 is listed in Table 9 or Oregon Pub 17 in accordance to the AGI amounts listed there. Turbo Tax is listing the correct values.

[taxeycab]

Your statement contradicts Oregon Pub 17. The only correct value for Part C, line 1 is $8,250. Please read Oregon Pub 17 where it states "Enter $8,250 ($4,125 if your filing status is married filing separately)." There can be no other interpretation of this, other than to enter either $8,250 (or $4,125).

TurboTax uses a different value, and is therefore incorrect.

If one were to use the incorrect value (as suggested by TurboTax), then it would be impossible for anybody with Federal AGI above $125,000 Single ($250,000 Married) to claim any Foreign Income Tax subtraction because Line 1 and Line 2 would be equal, so Line 3 and finally Line 5 would be 0.

However, as per 2024 OR-17, "Your foreign tax subtraction plus the subtraction for your current federal tax liability plus any additional federal tax paid for a prior year can’t be more than $8,250 ($4,125 if your filing status is married filing separately)."

If the Federal Tax Liability is less than $8,250 because of the AGI phase out, e.g., $6600, then one is entitled to claim a subtraction up to the difference of $8,250 - $6,600 = $1,650 in Foreign Income Tax.

I implore you, please read the publication, compute the correct value as per the instructions, and compare that with the result from TurboTax. You will observe the error.

This error in TurboTax can cost Oregon Tax payers up to $300 every year if unable to claim the Foreign Income Tax subtraction.

[DaveF1006]

I do see where your concern is and this may require escalation. Here is what we can do.

To look at this in detail and to report a possible product defect, we would like to see a diagnostic copy of your return. The information in this file is a sanitized copy meaning there is no personal information, only numbers so that we can troubleshoot in depth, check for calculation issues, and to see how certain items are applied. Here is how to order. 

For Turbo Tax online, go to tax tools>tools>share my file with agent.  When this is selected, you will receive a token number.  Respond back in this thread and tell us what that token number is. 

If you use the desktop version, go to the black stripe at the top of the program, click on online, and then select send tax file to agent. Let us know what the token number is.

Once you send the file, our investigations team will examine and take corrective action.

[taxeycab]

Thank you for your help on this issue. The token is: 3499 1603 0 -73901449.

[taxeycab]

Any update on this issue? I haven't received any communication from TurboTax after submitting my token.

Is TurboTax going to fix the issue for this year's filing?

[Mavery24]

Turbotax is wrong.  From Oregon publication 17 on page 72, the following worksheet (Part C) is used to determine this FTC subtraction.  The AGI limits only come into play only in step 2, which is your federal tax subtraction allowed for lower income Oregon taxpayers, NOT in step 1.  Step 1 is set at $8250/$4125.  We had examples of this in our TaxSlayer (another tax program) tutorials, and the deduction was $3000 even for higher income taxpayers.  

I will override by going to the "Other Subs" form, and in Part C in the middle of the form, override line 1 with $8250 to get the FTC subtraction.

Part C: Foreign income tax subtraction 

[Subtraction code 311] [Modification code 603] 

If your total federal tax subtraction (Part A, line 11 plus Part B, line 5) is $8,250 ($4,125 if your filing status is married filing separately), Stop—you can’t subtract your foreign tax (ORS 316.690). Otherwise, continue to Step 1. 

1. Enter $8,250 ($4,125 if your filing status is married filing separately). 1.__________ 

2. Enter your total federal tax liability subtraction (Part A, line 11 plus Part B, line 5). 2.__________ 

3. Line 1 minus line 2. 3.__________ 

4. Enter the amount paid in foreign tax, but not more than $3,000 ($1,500 if your filing status is married filing separately). 4.__________ 

5. Enter the smaller of line 3 or line 4 here and on Schedule OR-ASC section B (subtraction code 311) or Schedule OR-ASC-NP section D (modification code 603). 5.__________ 

[DawnC]

The experience you described has been reported and is currently being addressed by the development team.   @taxeycab   @Mavery24 

[taxeycab]

This is working correctly for me now as of April 1, 2025. Thanks for the fix!