United States Foreign Tax Credit (FTC)



What Is Foreign Tax Credit ?

The Foreign Tax Credit is one method U.S. expats can use to offset foreign taxes paid abroad dollar-for-dollar.

Who is Eligible Foreign Tax Credit ?

You’re eligible for foreign tax credit if you’re a U.S. citizen or resident who earns foreign income abroad and already paid income taxes to your country of residence.

How Much is Foreign Tax Credit Worth ?

To get your maximum credit amount you’ll divide your foreign-sourced taxable income amount by your total taxable income, then multiply that result by your US tax liability.

What is an FTC Carryover ?

If you don't use the full tax credit amount you've allowed, your unused amount could be carried over to the next tax year or rolled back to the previous year.

Which Foreign Taxes are Qualified ?

You can claim the credit only for those foreign taxes levied on you from the US occupation or from a foreign country. Generally, only war benefits, income and excess gains qualify for the tax credit.

What is the Limit of Foreign Tax Credit ?

The IRS limits the foreign tax credit you can claim to the lesser of the amount of foreign taxes paid or the U.S. tax liability on the foreign income.

How to Claim the Foreign Tax Credit ?

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File Form 1116 to claim the foreign tax credit if you are an individual, estate, or trust, and you paid or accrued certain foreign taxes to a foreign country or U.S. possession.