Unable to Get the proper Foreign Tax Deduction on 2024 Returns...

[DonCatrow]

I paid foreign taxes on dividends in the amount of $1,500. I have  foreign earned income in the amount of $7,000.  I wish to take the $300/600 deduction on Schedule 3, Line 1. I was able to do this on the 2023 and prior year's  returns. 

I have tried to enter the $300/600 deduction directly on Schedule 3, but the software won't allow an entry there. I have tried putting the info on Form 1116, but can only get a $92 FTC. (which is the correct available FTC), I totally get that. I  I have tried deleting Form 1116 and entering all the info first through  the "Interview" and then through the "Forms" method. There is either a software glitch here or I am missing where the data should be entered. I am a CPA and have been preparing tax returns for over 50 years and using TurboTax for 11 years.  I don't think I am over the hill yet, but I could use some help here! Thanks so much for any insight you can provide ...

[JamesG1]

In TurboTax Premium Online, I am able to report a foreign tax credit without an IRS form 1116 on Schedule 3 Additional Credits and Payments line 1.

Follow these steps:

1. Down the left side of the screen, click Federal.
2. Down the left side of the screen, click Deductions & credits.
3. Click the down arrow to the right of Estimates and Other Taxes Paid.
4. Click to the right of Foreign Tax Credit.
5. Follow the screens to see whether you qualify for the credit or deduction.

[Mike9241 · Accepted solution]

did you have FTCs on the foreign-earned income? Then you must file form 1116 unless you forgo the FTC on this income or qualify for the foreign earned income exclusion. No FTC is allowed if you use the FEIE.

The only exception to filing the 1116 is when you only have 300/600 foreign taxes withheld on dividends, interest, and royalties. Why are you forgoing a possible additional tax credit of $1200 on the dividends? 

in any case, if you only want just the 300/600 FTC on the dividends: 1) delete the 1116s (not possible if you are taking the FTC on the earned income). Also, make sure on the info worksheet that the box to force the 1116 is not checked  

2) then on the 1099 for dividends enter only 300 or 600 do not link to a column on the 1116. Do not specify country or RIC. Do not specify the amount of the foreign dividend income. 

[DonCatrow]

Mike9241: Thanks so much! Using your directions, I was able to add a $600 FTC deduction to my tax return. It is not an intuitive method of adding the $300/600 deduction to a return by leaving out some of the info on Form 1099 Div., but it works. Your solution should be incorporated into the TT instructions or help.

Regarding your question about getting the full FTC, that won't happen because my net tax liability is always very low due to a lot of depreciation from rental properties. If I filed a Form 1116 this year, I would get only a $92 credit and I would never be able to utilize any carryover amounts. $600 is the most I can ever use.

The foreign tax credit is limited to the lesser of the actual foreign taxes paid or the U.S. tax liability on the foreign income. This is to prevent you from receiving a double benefit from the credits.

You were very helpful...