Foreign Earned Income Exclusion and Foreign Tax Credit

[crystalyu]

Hi,

I am working on an individual income tax return (Form 1040). The taxpayer had foreign earned wages of $230,000 in 2021. He can claim $108,700 as a foreign earned income exclusion. The remaining $121,300 is a taxable income. Therefore, the taxpayer had a big amount of tax due on 2021 tax return.

Based on the IRS rule - If you elect to exclude either foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on income you exclude. If you do take the credit, one or both of the elections may be considered revoked. However, you can choose to take a foreign tax credit on any amount of foreign earned income that EXCEEDS the amounts you excluded under the foreign earned income exclusion and/or the foreign housing exclusion.

The taxpayer paid $34,000 foreign taxes in 2021. I believe it exceeds the amount that is excluded under the foreign earned income exclusion.

My question is: in ProSeries software, how can I take the foreign tax credit on any amount of foreign earned income that EXCEEDS the $108,700 exclusion to offset his tax liability? 

Your help is greatly appreciated.

Hong

[sjrcpa]

Dorm 1116. Foreign taxable income = 121,300

Prorate the $34,000 foreign tax between 121,300 and 108,700.

As to how in ProSeries I don't know.

And do an alternate calc to see if TP is better off taxing all of the $230,000 and claiming FTC.

[crystalyu]

Thank you so much.