Form 1116 foreign tax credit is a non-refundable credit based on the tax payable to foreign countries. Consider, for instance, a U.S. citizen abroad who never filed a tax return. If they are working in a foreign country, their form 1040 is likely going to contain substantial foreign income. Well, paying both the U.S. and foreign tax on the same money is counter-intuitive. Hence why the final tax liability will reflect a reduction based on the tax already deemed payable to the foreign country. The foreign tax credit carryover further allows taxpayers to utilize the credit for up to 10 years after. They can additionally use it to offset their earnings for one year prior to the filing date. Note that the foreign tax credit carryover is one of the most generous carryovers in the Internal Revenue Code... [read more]