How is the foreign tax credit limitation calculated?

FTC is limited to: (Foreign Income / Total Worldwide Income) multiplied by US Tax on Worldwide Income. You cannot credit more foreign tax than the US tax attributable to that foreign income.

Should expats use FTC or the Foreign Earned Income Exclusion?

In high-tax countries (UK, Germany, France), FTC often eliminates US tax entirely. In low-tax countries, FEIE may be better. Cannot use both for the same income in the same year; compare outcomes annually.

Can I carry forward unused foreign tax credits?

Yes. Unused FTC carries back 1 year and forward 10 years (Form 1116). The basket system means passive income credits cannot offset general income taxes — separate tracking is required.

Foreign Tax Credit Calculator

Calculate the allowable foreign tax credit (FTC) on foreign income taxed by another country. Shows basket limitations, excess credit carryforward, and comparison to foreign earned income exclusion.

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Annual Rate (%)

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$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate the allowable foreign tax credit (FTC) on foreign income taxed by another country. Shows basket limitations, excess credit carryforward, and comparison to foreign earned income exclusion. Use the foreign tax credit result to inform your calculation.

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Frequently Asked Questions

How is the foreign tax credit limitation calculated?

Should expats use FTC or the Foreign Earned Income Exclusion?

Can I carry forward unused foreign tax credits?