Question

short summary at least 5 sentences covering Foreign tax credits ( refered to as form 1116)

Answer 1

When a person resident of a Country (say Country A), pays taxes for incomes earned in another Country (say Country B) to the government of Country B, then such person can claim the credit of taxes paid in Country B while filing the Income Tax Return in the resident country, and that credit is called Foreign Tax Credit.
Many US expats take the opportunity of claiming the Foreign Tax Credit on their US expat taxes, by filing the Form 1116 and attaching it to Individual Tax return of US, Form 1040. The liability of US tax due on expat income is reduced by the credit available.
Th0e credit is not available for the income which is not included in the Gross Total Income of the person, and also the credit cannot exceed the US tax liability, as you cannot claim any refund of the credit through US tax return.
Any balance of credit unutilized in any year can be carried forward to the tax year immediately preceding the current or carried forward for the next ten years. This means that you can use the excess credit to try to obtain a refund from the prior year where you did not have enough credits to offset your US tax liability or choose to offset your future years’ tax liability.