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I have foreign tax credit carryover for $14,000 in 2022 US tax return. In 2023 I will be getting a foreign tax refund of $21,000. What happens when I file 2023 tax return? Will I have $7000 tax due?

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You will need to go back to the original return on which you claimed the credit and amend it to reflect the actual tax paid to the foreign country. You'll then need to amend all the subsequent returns where the carryover was used to reduce your tax liability. If your foreign refund comes with interest, you'll need to pay interest on the resulting difference to the IRS (but no more than what you've got from the foreign government). If you didn't get paid any interest - you'll owe no interest. If the refund was taxed - you'll include that tax in the calculation for the original credit.

Details and example in Publication 514:

Example.

You paid a foreign income tax of $3,000 in 2020, and received a foreign tax refund of $500 in 2022 on which a foreign tax of $100 was imposed. When you refigure your credit for 2020, you must reduce the $3,000 you paid by $400.

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