Turbotax computes gross income for foreign tax credit purposes wrong

[martoro]

Using Turbotax 2025 Premier Desktop. I have what I think is a relatively straightforward case of passive dividend income from a mutual fund with foreign tax paid.

Due to a previous year selection, I cannot use the simplified method, but even though there are no adjustments when clicking through the various Turbotax screens.

When checking the computation afterwards, I see Turbotax is inflating the gross income which is used in a denominator to calculate a limit of how much of the foreign tax paid can be claimed as a credit.

When I go to the form, 1116, I right click on the cell for Gross income and choose "Data Source". It shows me what it used to calculate it (see it below). I don't have schedules C, E, F, K-1, K-3. So again, the calculation should be really straightforward: The items from forms 1040, Schedule 1, and Schedule D. Except that I get a number significantly lower than Turbotax.

I've checked this quite extensively, cross checked with previous posts (foreign tax section appears to be quite problematic), and at this point this appears to be a bug in Turbotax. Could someone please take a look?

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Form 1116 (COPY 1) : Line 3ea
Calculated Gross income from all sources:

This is total income before deductions and is the sum of:

Form 1040, lines 1, 2b, 3b, 4b, 5b and 6b plus
Schedule 1 (Form 1040), line 1 plus
Schedule 1 (Form 1040), line 2a plus
Schedule C, line 7 (all copies) plus
All gains reported on Schedule D minus Schedule D, line 11, Subtotal Line A(Form 4797, Gain from Part I) plus
All gains reported on Form 4797 plus
Schedule E, line 3 total plus line 4 total plus
Schedule K-1 Worksheet - Estates and Trusts, Box 14 Code B : Foreign Tax Information section, line 7 (if it has a value); otherwise income reported in Part III lines 5, 6, 7 and 8 plus
Schedule K-3 - Partnerships Line B - Gross income from all sources
Schedule K-1 - Partnership Additional Information page 1, Box 11 section,Code A, line 1 (if positive) and line 3 and line 4 and Code I, line 5
Schedule K-3 - S Corporations Line B - Gross income from all sources
Schedule K-1 - S Corporation Additional Information page 1, Box 10 section, Code A, line 1 (if positive) and line 3 and line 4 and Code H, line 5
Schedule F, line 11 (all copies) plus
Form 4835, line 7 ( all copies) plus
Schedule 1 (Form 1040), line 7 plus
All positive income amounts on the Other Income Statement.

[martoro]

It's been a couple of days and no one has responded. I'm going to assume this is a bug in Turbotax. I expected someone from Intuit would chime in, but nope.

[RobertB4444]

Is the number that you are seeing the sum of your income and the gross sales amount on schedule D instead of the net sale amount?  Because that may be what it is using.

[martoro]

This was something I suspected and verified, but it is not. They are very different.

[DaveF1006]

 If TurboTax’s number is higher than your sum of 1040 lines, check these specific areas:

1. Gross vs. Net on Schedule D: Look closely at the data source line: "All gains reported on Schedule D minus Schedule D, line 11..." TurboTax uses gross gains before offsetting them with losses for this specific denominator. If you had $10,000 in gains and $8,000 in losses, your 1040 shows $2,000, but Form 1116 might be pulling the full $10,000.
2. The "Taxable Income" vs "Gross Income" Trap: The denominator for the 1116 limit is actually Taxable Income (from Form 1040, line 15) modified by any capital gain/qualified dividend adjustments. If TurboTax is showing "Gross Income from all sources" in a worksheet, it may be adding back deductions you thought were already subtracted.
3. Schedule 1, Line 8z: Check if you have any "Other Income" items that are positive. TurboTax aggregates all positive values from the "Other Income Statement" into that denominator.

These are only suggestions that might be pertinent to your tax return.

[martoro]

Thanks for the reply.

1. This is something that happens in my tax return so I checked against it specifically only using the gains, but not the losses. Still TT overestimates gross income by a lot.

2. This is another thing I suspected and checked if TT is adding back deductions, but still the numbers are quite off.

3. Checked "Other Income" specifically, but no big items there.

Still appears to be a TT bug.