High Tax Kickout for foreign rental property

[jingle123]

I have a foreign rental property and I paid foreign tax from the rental income. However, the net rental income for US tax reporting is 0 after depreciation (the foreign country doesn't allow depreciation). When I report this foreign tax on form 1116, do I need to reclassify it to General category because of High Tax Kickout?

[Vanessa A]

No.  You would not move it to the general category.  Since your foreign sourced income is $0, the High Tax Kickout does not apply to this situation.

The foreign tax credit limitation for 2025 will be $0, however, you can carry the unused amount back one year or forward up to 10 years.

[jingle123]

Based on IRS code 1.904-4(c)

“If, after application of this paragraph (c), passive income is zero or less than zero, any taxes imposed on the passive income are considered related to the same separate category of income to which the passive income (if not reduced to zero or less than zero) would have been assigned had the income been treated as high-taxed income (general category, foreign branch category, section 951A category, or a specified separate category). For additional rules regarding losses related to passive income, see paragraph (c)(2) of this section.”

it contradicts with what you said. It sounds like the unused foreign tax should be carried over under General category?