Foreign tax credit always shown as 0 after multiple attempts to add it.

[alec-lieberman]

Hello, I am trying to add the foreign income tax credit to my return in Turbo Tax. I only paid interest on foreign wages earned from a job overseas. After I add the amount of the tax in the general income section on menu pages, the amount of the foreign credit is always 0. I have done this multiple times and it is never anything other than 0. Any help is appreciated!

[rogge1722]

Here are the screen sequences.

We go through the FTC interview screen by screen up to the point of entering Foreign taxes paid.
To ensure a clean start, make sure any existing Form 1116’s are deleted. We show the header, then the response.

1. Foreign tax credit
    Yes
2. Before we begin
    Yes
3. Foreign taxes
    Continue
4. Tell us about your foreign taxes
    Check the applicable entry, then Continue.
5. Foreign taxes
    Continue
6. Do you want a deduction or credit?
    Take a credit
7. Reporting foreign taxes paid.
    Continue
8. No other income or expenses
    No
9. Completing forms 1116
    Continue
10.  Foreign tax credit worksheet
    Continue
11.  Choose the income type
    General
12.  Country summary.
    Add a country.
13.  Country Name
    Select the country
14.  Other gross income- country
    Enter the amount even though reported elsewhere.
    Continue
15.  Definitely related expenses-country
    Enter applicable data then Continue.
16. Foreign losses
    Enter applicable amount then Continue
17. Foreign taxes paid –country
    Enter the data then Continue.
18.  Country summary
    Done.
Continue working through the remaining screens until finished.

[sthe]

I have the same issue. No matter what I do, the total credit ends up being zero.

I get to further screens that ask for "Gross Income Adjustment" and i put the total deductions here again. It also says Your General category of income tax credit exceeded your allowed credit by the deduction amount. 

I don't know what this means

[DawnC]

You have to claim the income in TurboTax before you take the credit.     How to Report Foreign Income in TurboTax  

If your foreign taxed income was interest and dividends, you don't need Form 1116.    You also need to have a tax liability on Form 1040, otherwise, the credit rolls over to the next year.  Please see this article which explains the credit and income categories.   

[sthe]

 Thank you. The income is already part of W2 as this is a trailing liability for RSU grant from the original country. Does the income need to be stated again in form 1116?

For example, w2 says income of 20 units, which is the total income. Foreign component is say 10 units and the tax on it is also close to 10 units. In form 1116, is the income 0 or 10, followed by taxes of 10. It's unclear how to handle this in the software.  

[ErnieS0]

Yes. The income needs to be stated again in the Foreign Tax Credit section. TurboTax will not pick up foreign income included on your W-2.

Adding foreign income in the foreign tax credit section will not increase your overall income. It just tells TurboTax how much foreign income is available for the credit.

Foreign income and foreign tax paid would be the U.S. dollar equivalent of the value of the income of the 10 units and the tax paid on them.

From your original post, it's unclear if you actually paid any foreign tax. If you did, you should have a record of the amount of foreign tax paid and the amount of income.