To calculate the maximum foreign tax credit that taxpayers can claim, compare their foreign income taxed by the U.S. with their total income taxed by the U.S.
To complete Part I of Form 1116 for U.S. citizens who are Puerto Rican residents and received Puerto Rico source income:
A U.S. government employee reports wages on Form 1116, line 1. Do not include the Cost Of Living Adjustments (COLA) or exempt income.
Note: It is important to correctly separate the foreign income entered on Form 1116 from the total income on Form 1040.