Foreign Tax Credit Carryover not applied

[ihatethis69]

I have foreign tax credit carryover from 2019-2022 of >10k. In 2023 3 things happened:

1. I got married. We are married filing jointly for the first time.

2. Spouse (nonUS) earned foreign income for part of the year, then moved to the US, and later got a job and earned some US income. She has never lived in the US before this, and thus never earned any US income previously.

3. I earned no foreign income in 2023, as I resided/worked in the US the entire year.

In turbotax, I first input all our US sourced income, and saw the estimated refund. Then I added her foreign income and foreign tax paid (for the foreign tax credit for 2023). The estimated refund decreased, because she paid a low tax rate on that foreign income relative to our marginal rate in the US.

At no point has my carryover tax credit been applied. Can anyone explain why not? I understand that I can only use the carryover credit on foreign-earned income (aka hers....not my own, as it is US based). Am I missing something? Shouldn't it get applied to her foreign-earned income, so that our refund should not reduce after adding it?

[DawnC]

It sounds like you have excess Foreign Tax Credit for 2023, which is added to your carryover amounts.    Look at your foreign tax credit computation worksheet.   It will show you the total taxes you paid, the amount of credit calculated and any excess.   It sounds like your carryover amounts are increased, meaning there is no income to apply your carryover amounts to on your 2023 return.  

Do you have multiple income categories or just the earned income/general category?