Schedule 3, Part 1: Nonrefundable Credits, Line 1: Foreign tax credit does not seem to come from my Form 1099-DIV, Line 7: Foreign Tax Paid

[myhui]

The amount in

Form 1040, Schedule 3, Part 1: Nonrefundable Credits, Line 1: Foreign tax credit

should come from my

IRS 2022 FORM 1099-DIV - DIVIDENDS AND DISTRIBUTIONS, Line 7: FOREIGN TAX PAID

But it doesn't.

The amount is set by the TurboTax software to the same value as Schedule 2, Part I, Line 2: Excess advance premium tax credit repayment.

Is this due to the constraint I read in another post where the Foreign tax credit cannot be greater than the total tax owing? My total tax owing in my admittedly very simple return is just the amount in Schedule 2, Part I, Line 2: Excess advance premium tax credit repayment.

I don't see the value in my FORM 1099-DIV, Line 7: FOREIGN TAX PAID, show up anywhere in my tax return.

The FORM 1099-DIV, Line 7: FOREIGN TAX PAID, comes from companies outside of the U.S. like BioNTech in Germany who pays dividends, and those dividends are taxed by the German government before ADR holders like myself get the after-tax part of that dividend. The amount of this tax witheld by the German government is shown in FORM 1099-DIV, Line 7.

[RalphH1 · Accepted solution]

The constraint to which you referred is indeed the reason for the number you’re seeing. There’s actually another possible limitation (the credit will be smaller than what you actually paid if the U.S. tax allocable to that amount of foreign income is smaller), but since you’ve verified the credit matches your tax liability exactly (at that point on the return), then that’s it.

The Foreign Tax Credit is a “non-refundable credit,” which means it can only reduce your tax liability down to zero, but no further. (Refundable and non-refundable Credits are discussed here.) So if the tax you would otherwise owe is less than your credit amount (as it’s normally calculated), the credit is reduced to the amount of the tax. (That’s a simplified explanation, as things get slightly tricky when there are multiple credits…) I hope this made sense, @myhui!