2025 Foreign Tax Credit Computation Worksheet

[jgruver]

I have to reconstruct my foreign tax credit carryovers for the past 10 years. When completing the 2025 Foreign Tax Credit Computation Worksheet Section: "Foreign Tax Credit Carryovers", what number from Form 1116 do I put in the column Foreign Taxes. The actual tax paid from 1116 Line 8, or the amount from 1116 Line 14 "...the total amount of foreign taxes available for credit?

There's 2 reasons I ask:

1) It makes a huge difference in the credit carryover

2) If I use the 1116 Line 8 then 2016 and 2020 end up being negative numbers and the IRS (not to mention TurboTax) won't accept that. Of course if I should just put "0" instead of the negative number then this is easy.

Thanks in advance. I really appreciate this.

[DaveF1006 · Accepted solution]

For the “Foreign Taxes” column in the Foreign Tax Credit Carryover section of the 2025 FTC Computation Worksheet, you generally use the foreign taxes available for credit — that is, Form 1116 Line 14, not Line 8.

Line 14 represents the total amount of foreign taxes available for credit after adjustments, reductions, and disallowances. This is the amount that actually enters the carryover system.

Line 8, by contrast, is simply the raw foreign taxes paid or accrued. It is not the amount the IRS considers “available for credit” and therefore not the amount that enters the carryover worksheet..

[jgruver]

Hi, thanks for that. I assumed it was Line 14 (and really wanted to use it as it didn't result in the negative numbers), but I've had two CPAs do my taxes for the past 6 years and both used Line 8. Since I filed my returns (Fed & CA) yesterday. I used Line 8 as I didn't get your reply until this AM. 

Do you suggest I file a 1040X to make the change, or is this something I can just let go?

Thanks again for your help!

Sincerely,

John

[DaveF1006]

Yes, I suggest you amend your return. You mentioned that using Line 14 makes a "huge difference." If using Line 14 results in a significantly larger carryover, you are essentially leaving money on the table for future years. If you don't amend, you are locked into the lower carryover amount you reported.

If the difference in the carryover is substantial enough to impact your future tax liability, filing a 1040-X is the standard way to protect those credits. 

[jgruver]

Thanks. We'll most likely never use what we have because of our foreign investments, but having more never hurts.

And just to be sure, the amount of credit used is the number that is put into the 1040.

One last (hopefully) question: if I amend 2025 FTC Computation Worksheet will that "fix" the credits back 10 years or do I have to amend every tax year 2014->2025?

Thanks again.

[DaveF1006]

No. Amending your 2025 worksheet or Form 1116 will not retroactively fix or "clean up" the previous 10 years in the eyes of the IRS. 

Whether you should amend the last 10 years depends entirely on what your goal is. Since you mentioned you’ll "most likely never use" the credits, the answer leans toward no, but there are two distinct paths you can take.

Path A: The "Just Keeping Records" Strategy (Recommended)

Should you do this? Yes, if you simply want to ensure your 2025 return is accurate and you have a paper trail in case you ever do need the credits (e.g., if you sell a foreign asset and have a huge tax bill).

What to do: Instead of amending 10 years of tax returns (which is a mountain of paperwork), you can "catch up" on Schedule B (Form 1116) for your 2025 return.

How it works: Schedule B is specifically designed to reconcile carryovers. You can use your past records to calculate the total unused credits from 2015–2024 and enter them into the "Carryover" section of your 2025 Form 1116. 

The Benefit: It officially puts the IRS on notice that these credits exist without requiring you to reopen every old tax year.

Path B: The "Full Amendment" Strategy

Should you do this? Only if you expect to get a refund from a previous year.

1.  You would file Form 1040-X for each year. Because you have a special 10-year statute of limitations for the Foreign Tax Credit, you actually can go back that far to claim a credit you missed. 
2. The Catch: You can only use a credit if you actually had U.S. tax liability on foreign income in that specific year. If you didn't have enough foreign income to "soak up" the credit back then, amending won't result in a check from the IRS—it will just result in a larger carryover.
3. The Verdict: If you are already in a "excess credit" position (meaning you pay more foreign tax than U.S. tax every year), amending won't give you any cash back. It just creates a bigger pile of credits you aren't using.

[jgruver]

Thanks again for your help. I think your Path A is the appropriate for me. In fact, I've almost completed that path. 

Re: your Path B, line 3 - my US taxes are consistently more than my foreign taxes, and following the worksheet instructions for any year results in more credits than I use, a larger carryover each year. Only one in the last 10 years was 1116 line 21 more than line 14 by a total of 46 credits...