Printable Form 2026

IRS Instruction 1116 (Schedule B)

IRS Instruction 1116 (Schedule B) – If you claim the foreign tax credit on IRS Form 1116 and have unused foreign taxes from prior years (or generate excess credits this year), you must complete Schedule B (Form 1116) — officially titled the Foreign Tax Carryover Reconciliation Schedule. This IRS form tracks the running balance of your foreign tax carryovers across up to 10 prior years and the current year.

This comprehensive guide, based directly on the official IRS Instructions for Schedule B (Form 1116) (Rev. December 2022) and cross-referenced with the 2025 Instructions for Form 1116, explains everything step by step. Whether you’re an expat, investor with foreign dividends, or business owner paying foreign taxes, understanding Schedule B ensures you maximize your credit without errors or lost carryovers.

Sample of Schedule B (Form 1116) – Foreign Tax Carryover Reconciliation Schedule (Rev. December 2022)

What Is Schedule B (Form 1116) and Why Do You Need It?

Schedule B reconciles your prior-year foreign tax carryover with your current-year foreign tax carryover. It creates a clear audit trail of all activity since your last tax return, showing:

  • Carryovers from the past 10 years
  • Adjustments (e.g., carryback corrections or section 905(c) redeterminations)
  • How much carryover you used this year
  • Any new excess foreign taxes generated
  • Amounts carried forward (or expired)

The total on line 3, column (xiv) flows directly to Form 1116, Part III, line 10 as your available carryover for the current year.

Key rule (per IRS): You must attach a separate Schedule B for each applicable category of income on Form 1116 if there is any foreign tax carryover in the prior year, current year, or both.

Do NOT complete Schedule B for section 951A category income (GILTI) because carryover provisions under section 904(c) do not apply.

Who Must File Schedule B (Form 1116)?

File Schedule B with your Form 1116 for tax year 2025 (returns filed in 2026) if:

  • You have a foreign tax carryover from any prior year in a separate category, OR
  • You generate excess foreign taxes this year that can be carried back 1 year or forward 10 years.

Separate categories (check only one box per Schedule B):

  • Foreign branch category income
  • Passive category income
  • General category income
  • Section 901(j) income
  • Certain income re-sourced by treaty
  • Lump-sum distributions

Country codes: Use IRS.gov/CountryCodes for lines (h) and (i) when required.

Important Definitions (Straight from IRS Instructions)

  • Excess limitation: Your foreign tax credit limitation (Form 1116, Part III, line 23) > current-year foreign taxes available for credit (sum of lines 9 + 12 + 13). You can use prior-year carryovers this year.
  • Excess foreign taxes: Current-year foreign taxes available for credit > your limitation. You generate a new carryover (carry back 1 year / forward 10 years).

All amounts must be in U.S. dollars and reported in English.

Step-by-Step: How to Complete Schedule B (Form 1116) Line by Line?

Use a separate Schedule B for each category. The form has two pages with columns for the 10th preceding tax year through the current tax year, plus subtotals and totals.

Lines 1–3: Adjusted Foreign Tax Carryover from Prior Year

  • Line 1: Enter amounts from line 8 of your prior-year Schedule B (shifted one column). Example: Current-year column (i) ← prior-year line 8 column (ii).
  • Line 2: Adjustments since filing last return:
    • 2a Carryback adjustment (column xii only): Difference between estimated vs. actual carryback (positive or negative).
    • 2b Section 905(c) redeterminations.
    • 2c–2g: Domestic audits or other adjustments (describe each).
  • Line 3: Add lines 1 + 2. Column (xiv) total → Form 1116, Part III, line 10.

Form 1116 Part III, line 10 references Schedule B line 3, column (xiv) directly (2025 version shown)

Line 4: Foreign Tax Carryover Used in Current Tax Year (Only if Excess Limitation)

Enter as a negative number. Start with oldest carryover (column i) and apply to your excess limitation, column by column. The total used cannot exceed your excess limitation.

Line 5: Foreign Tax Carryover Expired Unused (Only 10th Preceding Year)

If any amount remains in column (i) after line 4, it expires here (negative number).

Lines 6–8: New Carryover Generated This Year (Only if Excess Foreign Taxes)

  • Line 6: Excess foreign taxes this year (column xiii and xiv).
  • Line 7: Amount carried back to the first preceding tax year (negative; must be an excess-limitation year). You may use an estimate if final amount unavailable.
  • Line 8: Remaining carryover to following years (line 3 – 4 – 5 – 6 – 7, but adjusted per rules). Must equal zero in the 10th preceding column.

Line 1 Reconciliation Worksheet (at end of instructions): Use only if amending 2021 foreign tax credit within the special 10-year statute of limitations under section 6511(d)(3).

Real-World Example from IRS Instructions

Sam had $100 excess foreign taxes in 2022. He estimated $20 carryback to 2021 and carried forward $80. Actual carryback was only $15.
In 2023:

  • Line 1, column (xii) = $80 (from prior line 8)
  • Line 2a = +$5 (excess estimated carryback)
  • Line 3 = $85 adjusted carryover

This prevents over- or under-claiming credits.

How Schedule B Integrates with Form 1116 and Publication 514?

  • Carryover from Schedule B, line 3, col. (xiv) → Form 1116 line 10.
  • Carrybacks require filing Form 1040-X (or equivalent) for the prior year.
  • See Publication 514, Foreign Tax Credit for Individuals for detailed examples and special rules (pre-2018 taxes, oil & gas income, etc.).
  • No carryovers allowed if you claimed the foreign tax deduction instead of credit in a prior year.

Pro Tips & Common Mistakes to Avoid

  • Always use a separate Schedule B per category — mixing triggers IRS scrutiny.
  • Track the 10-year carryforward window carefully; unused credits from the 10th preceding year expire.
  • Document every adjustment with descriptions on line 2.
  • For amended returns or carrybacks, attach revised Schedule B(s).
  • Double-check currency conversion and country codes.
  • Software like TurboTax or professional preparers often auto-generate Schedule B, but verify against official IRS instructions.

Current version note (February 2026): Schedule B (Form 1116) and its instructions remain Rev. December 2022 — the latest available on IRS.gov. Form 1116 itself is updated annually (2025 version released January 2026).

Download Official IRS Resources

Final Thoughts

Mastering IRS Schedule B (Form 1116) prevents lost foreign tax credits worth thousands of dollars and keeps your return audit-proof. It’s the essential reconciliation tool that turns potential excess foreign taxes into usable credits over 11 years total (1 back + 10 forward).

For complex situations (multiple countries, GILTI, redeterminations, or large carryovers), consult a tax professional or use IRS Free File / VITA if eligible. Always verify the latest on IRS.gov/Form1116 before filing.

Questions? Drop them in the comments or check the official instructions linked above. Accurate foreign tax credit reporting starts with proper Schedule B reconciliation.

This article is for informational purposes only and is not tax or legal advice. Base your filing on the official IRS documents and consult a qualified tax advisor for your specific situation.