I'm frustrated. Music theory is just not clicking with me. I feel like my brain just isn't wired to understand it. My instructor will go over something pretty basic, but then when he expands on it, or shows me something "that I can do now that I know that" I just don't get it. And it's driving me crazy and sapping my desire to practice. Honestly, I don't even know how to explain what he's showing me that I'm not getting...so yeah, that's where I'm at with theory.
I can play some songs based on tabs. Or my instructor will write out the song with just the chord in each measure & and I'll decide what note(s) I'll play to accompany the song. John Hiatt's "Dust Down A Country Road" for example. Instructor gave me the chords in each measure & I came up with a line pretty close to what Davey Faragher plays...but not exactly what he plays.
So I can do some things but I feel like I will only progress if I know some theory...but what if I just can't understand it? Am I sunk? If I simply can't understand theory what can I do?
Any and all advice is greatly appreciated!
Theory is a huge subject to master and simultaneously simple and infinitely complicated. In all honesty you could study music for the rest of your life, and still have much to learn. You'll forget plenty along the way as well

. I know this sounds intimidating, but there is no rush. Take your time and learn at your pace.
Here is some perspective. If you were studying in a formal environment you would be expected to spend most of every day studying and thinking about music. Even when fully immersed to this degree, it can take a couple of years before everything really starts to click. You have to learn foundational material and then build incrementally off of it for an extended time before you assemble enough of the puzzle for the concepts to really start making sense and fitting together. In my experience, most music majors learn theory in a class and apply it by completing written assignments, which are usually worked out on piano.
Learning theory teaches you how to think about, interpret, discuss, and analyze music, etc. Unfortunately learning theory does not mean you will automatically be able to apply it directly to your instrument. At first trying to play while using theory is very difficult because you are essentially trying to do several things at once: keep track of time and feel; remember the key signature and think about the specific notes in each chord, listen to what everyone else is doing, interpret everything and decide what note to play and how to play it. But with time and practice, your mind and body creates essentially a library of automated patterns that you can easily apply with little thought.
The trick is to slow down as much as necessary to do the work and practice, practice, practice till it becomes automatic. You will notice your speed improves over time; however, when you learn new material that has a type of chord progression you are not familiar with, it's normal to slow down, analyze the chords and key centers, and practice slowly until the progression makes sense. This will be especially true if you play jazz, as jazz chord progression tend to modulate frequently and the tonal center is often ambiguous or perhaps modal.
If you're like me, you will find that you shift in and out of various thought processes while you are playing. For example, sometimes I play by ear, and sometimes I rely on theory to guide my fingers.
If you think your future is playing music, learning theory will likely open doors and take you significantly further than you will go by simply playing tab and copying recordings. At the very least theory makes music more engaging and involved.
Perhaps time management is a good thing to consider. You don't want to burn out. Dedicate some time to study and apply theory, but also set aside time to have fun.
Good luck!