Hope I'm not driving anyone mad with my slogging through this form... but I am learning a lot.
Line 3b of Form 1116 pertains to "Deductions that do not relate to any specific type of income." "Type of income" means, whether it is foreign source or not.
I contributed $4,150 last year to a self-employed 401(k) plan. The income related to this was "definitely" sourced in the USA, as it was from my one-man consulting business, located entirely in the USA.
Turbotax puts this $4,150 on Line 3b. I think that it doesn't belong there, since the deduction can be sourced to specific income. Am I right?
I'm discovering that Form 1116 seems to have a lot of weird effects. For example, given that I'm in the 28% bracket and not affected by any funny stuff like deduction/exemption phaseouts, AMT, passive loss limits, etc., I would expect a $4,150 retirement plan contribution to reduce my tax by 28% of $4,140. In fact, the difference is more like
17%. OTOH, a quick estimate pertaining to dividends (I don't actually have all my 1099's yet) suggested a marginal rate on dividends of about 11.2%, rather than 15%.