Foreign tax credit carryover

When foreign tax paid in a category exceeds the §904 limit (the US tax on the foreign-source income in that category), the excess is not lost: §904(c) carries it back one year and forward ten. The constraint people miss is that the carryover stays locked inside its separate limitation category — excess credit in the general category cannot be used against passive income, and vice versa. Carryback to the prior year is mandatory before any carryforward, which generally means amending that year. Credit carried forward expires unused after the tenth year. Expats in high-tax countries routinely accumulate carryovers they never use, because the same rate differential that creates the excess also prevents the limit from ever rising enough to absorb it.