I have $887 of foreign tax paid shown on Box 7 of my 1099-DIV from various countries. I am trying to get the foreign tax credit but when I go to "deductions and credits" and then "foreign taxes" and click through it asks if I want an itemized deduction or to take a credit. I click "take a credit" and have tried to answer the questions that follow (the only foreign tax paid is related to ETF's listed on the NYSE which hold some foreign securities). I don't know what I am doing wrong but I do not get the credit (my taxes are lower when I say I want to itemize instead of getting the credit, but that doesn't make sense). Any ideas on how to fill out the foreign tax credit screens properly in this situation? I am using TurboTax desktop. Thank you!
After you enter the 1099-DIV the second screen following says "Tell Us About Your Foreign Dividends". That's where you'll enter that $8136. Without that amount you don't qualify for the credit because the system doesn't know the amount of foreign income that you paid taxes on.
Once you've done that you need to go to the deductions and credits section of your federal return to "Other Taxes Paid" and click start next to "Foreign tax credit". Tell the system that you received the dividends from an RIC (Regulated Investment Company). Follow through to the end. The system will tell you if the foreign tax credit is limited or disallowed for you.
It is possible that the foreign tax deduction is more advantageous than the foreign tax credit. You are allowed to deduct all of your foreign taxes but can only take the foreign tax credit in the current year to the extent of your US income tax on foreign income. So if your foreign tax rate is high and your foreign income is low in relation to your US income, the deduction may have the better result.
You can look on line 1 of your Schedule 3 to see if you are getting the foreign tax credit when you choose that option in the program.
To view your form 1040 and schedule 1 to 3:
Thank you@ThomasM125. I am using TurboTax desktop but was able to access the 1040 but there is not a Schedule 3 (only Schedule 1 and 2). Couple other specifics:
--The supplemental information provided by Fidelity for the 1099-DIV has foreign income of $2,608 for non qualified dividends and $5,528 for qualified dividends for a total of $8136 of total foreign income (and foreign tax paid of $887). I did not report this foreign income on the foreign tax screens as I interpreted the instructions as saying do not report amounts that have already been included in 1099-DIV amounts. Should this be included somewhere? (Other than in the totals when I input the 1099-DIV information for Schedule B"?
--I have the following carryovers from 2023 related for Form 1116: (a) General Limitation Income Excess Limit; (b) Passive Income Excess Limit" and (c) "Foreign Branch Income Excess Limit". Each of these carryovers is over $1000 (higher than the foreign tax), but a credit is still not being generated.
Thanks again.
After you enter the 1099-DIV the second screen following says "Tell Us About Your Foreign Dividends". That's where you'll enter that $8136. Without that amount you don't qualify for the credit because the system doesn't know the amount of foreign income that you paid taxes on.
Once you've done that you need to go to the deductions and credits section of your federal return to "Other Taxes Paid" and click start next to "Foreign tax credit". Tell the system that you received the dividends from an RIC (Regulated Investment Company). Follow through to the end. The system will tell you if the foreign tax credit is limited or disallowed for you.