Tax Quandary Foreign Tax Credit being Applied to ACA Premium Tax

Financial Planning Tax Strategies
1

I’m trying to amend (yes, already) my 2022 return.
My tax on income is zero.
TTax generated a schedule 3 with a foreign tax credit.
On the 1040 it lists the foreign tax credit being subtracted from the ACA premium tax I owe (lines 20, 21 and 22) even though line 16 income tax is zero.
But on the 1040-X form, line 8, doesn’t allow the foreign tax credit to reduce anything since the tax on income is zero.

Thanks in advance for any thoughts on this -

2

I will point out that many people aspire to have zero tax liability, but when you achieve that aspiration, you are giving up the full benefit of non-refundable and partially refundable tax credits, including the foreign tax credit. If you are interested in seeing what all of those credits are, check out Schedule 3 2022 Schedule 3 (Form 1040) (irs.gov)

It’s because the foreign tax credit is non-refundable.

AJ

3 Likes
3

Thank you AJ
I hadn’t known that my tax would be zero until I found that there were excess Charitable Gifts that could be carried over from the previous year. Not exactly any planning on my part :roll_eyes:
That’s why I’m amending the return.
I’ll just delete the foreign credit part, I’m suprised that TTax didn’t catch it and delete it on it’s own.

4

No, that’s also wrong. Any unused foreign tax credit can be carried over to the following year. But you have to file Form 1116 to establish the credit so it can be carried over.

—Peter

4 Likes