foreign tax deduction vs credit

[karenkailua]

Can anyone tell me in what circumstance foreign tax deduction is better than foreign tax credit? We paid several thousand dollars in foreign taxes, comprised of tax on income from interest, dividends, stock capital gains, and property tax on a foreign home. Also paid foreign tax on a pension but it's a foreign social security equivalent that is taxable only by the foreign country by treaty, so that's not in play. We have a few years of taking the credit and have built up a lot of credit carryover which we've been advised will likely never be used. But also, we don't have enough to itemize deductions more than the standard $26k. 

TT help box in the interview doesn't really help. 

[Mike9241]

If You Can Iitemize and have FTC carryover, then a deduction could be better. if taken as a credit the current year FTC is used before the carryover which can result in losing some of the carryovers due to the expiration of the carryover period.  in your situation, it's not going to matter since you're going to lose it because you can't itemize or the carryover period expires. 

property tax on a foreign home is not a foreign tax eligible for the credit unless it's based on income earned on the home - ie it's a rental property. otherwise, it's only a schedule A deduction under taxes. property taxes paid on the value of the home even if a rental is not eligible for the FTC just as a deduction against the rental property income. 

[karenkailua]

Thanks so much. 

Is it correct to assume that we're since we're paying much more in foreign tax vs if we paid US tax (and not benefitting from the credit), maybe it's worth it to move that money to the US? There would be one time cost of converting the currency but we'd recoup that in the long run.

[karenkailua]

@Mike9241  I'm confused ...   you said "property tax on a foreign home is not a foreign tax eligible for the credit unless it's based on income earned on the home - ie it's a rental property." and "property taxes paid on the value of the home even if a rental is not eligible for the FTC".  Those seem to contradict each other, or is it the difference that one refers to tax paid on the value of the home? (I'm not sure what else property tax is based on?)

This home is not a rental property, but it may become one so I want to understand. I do get it that property taxes are a deductible expense for a rental property, and it would be odd that if you took that deduction you shouldn't also claim a credit. 

And, since it's not a rental property I thought property tax on a foreign home was no longer deductible (a recent change?) -- in the TT interview for deductions I'm asked to list all my other property taxes (ie second homes) and then it asks what amount is foreign and I don't think that is counted.