How to claim foreign tax credit carry overs?

[narendran-kandas]

I have foreign tax carry over from 2024- $381 for unused credit in General category income and $66 in unused credit in Passive category income. I was able to claim some portion of the foreign taxes paid in 2024 while $381 and $66 become a carryover. For 2025, I paid $38 in foreign taxes under the passive category income, and $18 become carryover. My questions are 1) I’ve enough taxes to claim these credits for both the years but turbo tax did not allow me to take the full credit (I opted for the simplified selection). 2) In case if I am not able to claim this year- I am using again online premium version for this year. It generated the Form 1116 and schedule B (Form 1116)  for $38 passive category income while there is no form for schedule B (Form 1116) to show carryover for $381. How to document the $381 carryover amount?

[DaveF1006]

Nothing about your situation is out of the ordinary, but TurboTax can be confusing—especially with the simplified foreign tax credit option. Here’s what’s going on and how to document your carryovers so the IRS has everything it needs.

First of all, you need to amend your 2024 return to choose the general method instead of the simplified method. The simplified method should be used only if you have nothing but passive income to report. Since you have both passive and general category income, the general method must be chosen. Choosing the General method will allow Form 1116 to appear in your return and allow the carryovers into future years.

Now after amending your 2024 return, you should be able to file your 2025 return, not receive the error message, and to be able to utilize the carryovers your 2024 return generated.

[ Edited 03/27/2026 I 1:13pm PST]

 

[narendran-kandas]

@DaveF1006 Thank you for the response.  Because I selected simplified method in 2024, turbo tax says I need to use the same selection for 2025.  

I don't want to carryover the amount to future years. Why can't I use the carried amount from 2024 in 2025?

[DaveF1006]

Yes, since you chose to use the Simplified Method in 2024, you must amend your 2024 return to pick the general method instead of the simplified method. This is because you have a mix of general category and passive income. You must use this method despite that the minimum filing thresholds were at or below the $300/$600 thresholds

The reason why the carryovers did not populate into your return is that if your foreign tax credit was at or below $300 if Filing Single ($600 if Married Filing Jointly), there was no Form 1116 generated. As a result, the carryovers weren't reported. Had you selected the general category, there would have been a Form 1116 and the carryovers would have been reported.

Once you amend your 2024 return, the election choice should populate into your 2025 return (if you filed with TurboTax both years) and it's general election from this point forward. Also, in 2024, a Form 1116 will be generated with the carryovers reported for that year.

Once this election is made, it's etched in stone unless you submit a Private Letter Ruling to the IRS to change the election.

When you prepare your amendment, you will be asked why you are amending. You must explain that you chose the Simplified method and you should have chose the General Method because you had a mix of passive and general category foreign income.

[narendran-kandas]

@DaveF1006 , After digging through, even the general category is incorrect. General category that got selected for the sale of second property (not used for business) should be also passive category. I will amend the 2024 for the right selections. Thank you for the guidance.