IRS Form 1116 (Schedule B) – If you’re a U.S. taxpayer dealing with foreign income and taxes, navigating the foreign tax credit can be complex. One key component is IRS Form 1116 Schedule B, also known as the Foreign Tax Carryover Reconciliation Schedule. This form helps reconcile unused foreign tax credits from prior years with your current tax situation, ensuring you maximize your credits and avoid double taxation. In this comprehensive guide, we’ll break down what Schedule B is, who needs it, how to fill it out, and more—using the latest official IRS guidance for tax year 2025 (applicable in 2026 filings).
Whether you’re searching for “how to fill out IRS Form 1116 Schedule B” or “foreign tax carryover rules,” this article provides step-by-step insights to help you file accurately.
What Is IRS Form 1116 Schedule B?
IRS Form 1116 Schedule B is an attachment to Form 1116 (Foreign Tax Credit) used to track and reconcile foreign tax carryovers. It maintains a running balance of unused foreign taxes paid or accrued in prior years, showing how they’re adjusted, used, or carried forward. This schedule ensures compliance with IRS rules on carrybacks (up to 1 year) and carryforwards (up to 10 years), preventing credits from expiring unused.
The form is divided into columns representing the 10th through 1st preceding tax years, the current year, and subtotals. It calculates “excess limitation” (when your credit limit exceeds foreign taxes) or “excess foreign taxes” (when foreign taxes exceed your limit), which determine how carryovers are handled. All entries must be in U.S. dollars and English.
You can download the official PDF of Schedule B from the IRS website: https://www.irs.gov/pub/irs-pdf/f1116sb.pdf.
Who Needs to File IRS Form 1116 Schedule B?
You must file Schedule B if you’re completing Form 1116 and have foreign tax carryovers in the prior tax year, current tax year, or both—for each separate income category. This includes:
- U.S. citizens, residents, estates, or trusts claiming the foreign tax credit.
- Taxpayers with unused credits from prior years due to limitations.
- Those generating new carryovers in the current year.
Use a separate Schedule B for each income category, such as passive category income, general category income, foreign branch category income, or others (e.g., Section 901(j) income or income re-sourced by treaty). Do not file for Section 951A category income, as carryover rules don’t apply.
If you’re amending a prior return (e.g., within the 10-year limitation under Section 6511(d)(3)), use the Line 1 Reconciliation Worksheet in the instructions.
Purpose of the Foreign Tax Carryover Reconciliation Schedule
The primary goal is to reconcile prior-year carryovers with current-year activity. It tracks:
- Carryovers from up to 10 prior years.
- Adjustments for events like carrybacks or foreign tax redeterminations (Section 905(c)).
- Usage in the current year.
- Expirations (e.g., unused carryovers from the 10th preceding year).
- New carryovers generated.
This reconciliation feeds into Form 1116, Part III, line 10, where the adjusted carryover is included in your total creditable foreign taxes. Proper use can reduce your U.S. tax liability on foreign-sourced income.
How to Fill Out IRS Form 1116 Schedule B: Step-by-Step Guide?
Filling out Schedule B requires data from your prior-year Schedule B and current-year Form 1116. Here’s a breakdown:
- Header Information: Enter your name, identifying number (SSN or EIN), and tax year. Check the box for the income category matching your Form 1116 (e.g., “c” for passive category income). For certain categories, include country codes (see IRS.gov/CountryCodes).
- Line 1: Foreign Tax Carryover from Prior Year: Enter amounts from line 8 of your prior-year Schedule B, shifted appropriately (e.g., prior year’s column (ii) goes to current year’s column (i)).
- Line 2: Adjustments to Line 1: Report post-prior-return changes, such as:
- Line 2a: Carryback adjustments (e.g., differences from estimated carrybacks).
- Line 2b: Section 905(c) redeterminations (foreign tax changes).
- Lines 2c–2g: Other adjustments with descriptions.
- Line 3: Adjusted Foreign Tax Carryover: Combine lines 1 and 2. The column (xiv) total goes to Form 1116, line 10.
- Line 4: Carryover Used in Current Year: If you have excess limitation, enter the used amount as a negative number.
- Line 5: Carryover Expired Unused: For excess foreign taxes, enter expired amounts (e.g., from the 10th preceding year) as negative.
- Line 6: Carryover Generated in Current Year: Enter new excess foreign taxes available for carryback/forward.
- Line 7: Amount Carried Back: Enter actual or estimated carryback to prior year as negative.
- Line 8: Carryover to Following Year: Combine lines 3–7. This becomes next year’s line 1.
The form continues on page 2 for additional preceding years. Use tax software like TurboTax or consult Pub. 514 for examples.
Key Lines and Sections of Schedule B
| Line/Section | Description | Key Notes |
|---|---|---|
| Checkboxes (a–h) | Income Category | Match to Form 1116; only one per schedule. |
| Columns (i)–(xiv) | Preceding Years to Current | Tracks carryovers chronologically; subtotals on page 2. |
| Line 3 | Adjusted Carryover | Feeds directly into Form 1116. |
| Lines 4–5 | Usage and Expiration | Negative entries for reductions. |
| Lines 6–7 | New Carryover and Carryback | Positive for generation, negative for back. |
| Line 8 | Future Carryover | Running balance; set to -0- if none. |
Foreign Tax Carryover Rules: Carryback and Carryforward
- Carryback: 1 year only; file an amended return (Form 1040-X) for the prior year.
- Carryforward: Up to 10 years; applied to earliest year first.
- No carryovers if you elected to claim the credit without Form 1116 in a year.
- Special rules for pre-2018 taxes, foreign oil/gas income, and suspended taxes (Section 909).
- Partnerships/S corporations report via Schedule K-3.
Recent Updates to Schedule B as of 2026
The instructions (revised December 2022) remain current for 2025 filings in 2026, with no major changes noted. Key clarifications include updated guidance on Line 1 (pull from prior Schedule B, line 8) and the reconciliation worksheet for 2021 amendments. Always check IRS.gov/Form1116 for developments.
Tips for Filing IRS Form 1116 Schedule B Successfully
- Convert all foreign currencies to U.S. dollars using appropriate exchange rates.
- Keep records of prior-year forms for accurate carryover tracking.
- If using tax software (e.g., Drake Tax or TurboTax), it may auto-generate Schedule B from Form 1116 inputs.
- Consult a tax professional for complex situations like redeterminations.
- File electronically for faster processing.
Conclusion
Mastering IRS Form 1116 Schedule B is essential for optimizing your foreign tax credit and managing carryovers effectively. By reconciling prior and current amounts, you can minimize your tax burden on foreign income. Download the form PDF here: https://www.irs.gov/pub/irs-pdf/f1116sb.pdf, and refer to the official instructions for personalized advice. For more on foreign tax credits, explore IRS Pub. 514 or consult a tax advisor to ensure compliance in 2026.