Does TurboTax's Foreign Tax Credit Calculation actually work?

[tharp993]

This is my first time filing taxes having moved abroad to the UK, and I am wondering if TurboTax is working correctly when it comes to applying the Foreign Tax Credit. I have minimal US-based income (<$200 from interest in bank accounts), and around $220k USD equivalent of foreign wages earned while in the UK. I have paid almost $90k of taxes to the UK government and so I had figured I would owe no US federal taxes. It seems to be general knowledge that paying taxes in a higher tax country would result in no tax liability. However, I still ended up with a ~$3k liability. I re-ran my taxes in a simplified scenario just to take out all extraneous variables to test this - and I still end up owing a tax liability in this scenario where my total income consisted solely of the $150k foreign UK wages (no dividends, investment accounts etc.), and me putting the $90k payment of Foreign taxes. 

I am hoping I am missing something here. 

[ErnieS0]

TurboTax does work correctly when applying the foreign earned income credit.

You don’t provide information about your filing status (married, single, etc.) or deductions or whether you are claiming the foreign earned income exclusion.

Based on your numbers ($220k income and $90k tax) I get a $0 liability, however I’m just using your topline numbers.

If you are using TurboTax Online, you can connect with a Live Agent and share your screen.

See How do I connect with a tax expert in TurboTax Live?

[tharp993]

Hello - I am married and filing jointly, my spouse has income of $40k USD, but I had excluded her income for the purposes of the test. I have no other deductions aside from the FTC. Turbotax had been defaulting to the standard deduction of $25,800. Upon looking further, this seemed to have caused AMT to kick in. If i choose to itemize deductions (making that 25,800 go to zero), then the liability goes to $0. Can I confirm that is what you are doing?  

[DaveF1006]

Yes, the standard deduction is not available for AMT purposes meaning it is added back in as income in determining AMT tax liability. This is clearly a case where it is more advantageous to take an itemized deduction even though the itemized deduction is less than the standard deduction. 

@tharp993