Tax goes up when I add a deduction?

Is form 6251, line 32 ("Alternative minimum tax foreign tax credit"), less than the amount on form 1040, line 51 ("Foreign tax credit. Attach Form 1116 if required")? I'm still trying to understand how form 1116 works, so cannot answer your question fully.

I think you can elect to not claim the state tax deduction. Every year people forget to do it, and no harm in that. But let's see what others say.

That's why I stopped using tax software.

Yes, you can stop taking a deduction. Use the software and minimize the taxes.

Does anyone know how form 6251, line 32 ("Alternative minimum foreign tax credit") works? Suppose you had $2000 in foreign tax through 1099- DIV only (and $20,000 in foreign dividends), would your AMT foreign tax credit be just $2000?

The 1116 is trying to limit your foreign tax credit rate to be no more than your federal US income tax rate; for AMT, no more than your AMT rate.

So in your example of a foreign effective rate of 10%, that will be allowed for both ordinary tax and for AMT. But had your foreign tax rate been 40%, your regular and also your AMT rate would have been lower, and so foreign tax credit would have been lower than what you paid in foreign tax.

Now then, if the 2000 of foreign tax had been 4000 on foreign dividends of

20,000, that is a 20% rate, which might be more than your qualified dividends rate, if applicable, so you might be limited to only 15% of 20,000 or 3000 of foreign tax credit based on the 1116.

Thanks for the explanation. I was struggling with these forms for some days.

The above paragraph is only true if these were foreign qualified dividends, right? If they were regular dividends, your regular US tax on them might have been more than 25%, in which case the AMT foreign tax credit and regular foreign tax credit would be the same.

Also, why is that that if your foreign tax is less than or equal to $300 (or $600 if married filing jointly), you don't have to file form

1116. Say you're in the 15% bracket and own foreign stocks that pay dividends and foreign taxes, and the foreign taxes are 20% of the dividends, and the foreign tax is around $50. Your foreign tax credit should be limited to some value under 15% (or as your total tax rate will be less than 15% after deduction, exemption, and amount in 10% tax bracket). Yet you get the full tax credit.

If you hoild ADRs then it is highly likely your qualified dividends and ordinary dividends are he same.

The rules someimes allow for de minimis amounts to undergo easier tax treatment and the law allows it here. So take advantage of it.