I'm a US citizen residing in Canada. I've already paid 2022 income tax in Canada, which includes taxes on self-employment, dividend, and inherited IRA income from the US. I have paid Canadian far exceeding my US tax liability, and am claiming the foreign tax credit. It appears that the foreign tax credit can only be applied to foreign income sources, is that right? I end up with a huge foreign tax credit carryover, and none of the tax paid to Canada on my US income is applied to offset my US taxes on this same income.
Is this how it's supposed to work, where the IRS assesses full tax liability on any US income regardless of whether it's taxed abroad? Or am I supposed to be entering this income in some way that TurboTax realizes it's included in the income that I've already paid taxes on in Canada?
To calculate your foreign tax credit, divide your foreign-sourced taxable income amount by your total taxable income, then multiply that result by your U.S. tax liability.
https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-how-to-figure-the-credit
@kyselad , don't know if you still need help with this .
But generally I am not sure that you are doing it right--
(a) as a US living in Canada ( foreign tax home ), your active income ( salary, self-employment income etc, ) is eligible for Foreign Earned income Exclusion to the tune of approx. , US$112,000.
(b) your US sourced income, if taxed by Canada can again be eligible for foreign tax credit / deduction.
Could you please tell me more about your situation -- when did you leave the USA, settle in Canada, under what visa, did you frequently visit USA during the year, etc, etc.
I will circle back when I hear from you