Does TurboTax calculate both Foreign tax credit and deduction and advise which is more advantageous?
Or is the user required to run 2 scenarios to calculate both and make the determination themselves?
I am well aware that the foreign tax credit is usually the better option, but you only get credit for a portion of the foreign tax paid, dependent on the ratio of foreign to total gross income. Mathematically, there is an inflection point where that ratio is small enough and the foreign taxes paid significant enough that taking a deduction is more beneficial.
I am just asking about TT software behaviour, not an explanation of the tax laws etc.
No. Turbo Tax does not calculate this for you. At this time, you are required to run two different scenarios and then make the determination which is more advantageous.
Taking a credit is usually better because it provides a dollar-dollar reduction on the tax owed. This is much better than taking the deduction which only reduces a taxpayers taxable income for the year. Deductions are much more simple though because there is no need to prepare additional tax forms. Some taxpayers value this simplicity and choose to take the deduction if they are able to itemize their deductions in their return.