TurboTax Online shows $69 Foreign Tax Credit, but it should be $153.33, per Line 7 of 1099-B, Foreign Tax Paid. How can I correct this? Edit doesn't work.

[DaveF1006 · Accepted solution]

It's possible you did not have enough US tax liability to offset the full amount of the foreign tax credit. The Foreign Tax Credit (FTC) is a non-refundable credit. This means it can only reduce your tax liability to zero; it cannot result in a refund of money you didn't actually owe the IRS. The IRS limits the credit to the lesser of:

• The actual foreign tax you paid ($153.33).
• Your U.S. tax liability on that same foreign income.

If your total U.S. tax (Form 1040, Line 16) is only $69—perhaps due to a lower income or other large deductions like the Standard Deduction—TurboTax will automatically cap the credit at that amount. You can’t "use" the remaining $84.33 this year because there is no U.S. tax left for it to offset.

You can verify this by looking at your Form 1040, Line 16. If that number is $69 (or if Line 18, your "Tax after credits," is $0), then the credit is doing its work.

[mecolella]

DaveF1006,

Thanks for the thorough explanation! Much appreciated!