Foreign Tax Credit Calculator

Calculate foreign tax credit vs deduction and see which saves more.

By Konstantin Iakovlev · Updated April 2026 · Source: IRS — Forms, Instructions & Publications

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FTC Allowed

$5,000.00

Better Option

Credit

Credit vs Deduction

Foreign Tax Credit$5,000.00
FTC Limit$9,600.00
Deduction Tax Savings$1,200.00
RecommendedCredit

Use the Foreign Tax Credit Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

When you earn income abroad, two governments may lay claim to the same dollars. The Foreign Tax Credit (FTC) exists to keep that from happening: it lets U.S. taxpayers offset their U.S. income tax with taxes already paid to a foreign country on foreign-source income. The result is relief from double taxation and, in many cases, a meaningfully lower overall tax bill.

The credit you can claim is capped at the smaller of two figures: the foreign income taxes you actually paid, or the portion of your U.S. tax that is tied to foreign income. That second figure comes from multiplying your total U.S. tax by a fraction: foreign source taxable income divided by total U.S. taxable income. The fraction is what keeps the credit from wiping out tax owed on your domestic earnings.

Taxpayers often default to deducting foreign taxes rather than crediting them, even though the credit usually delivers a larger benefit dollar for dollar. Getting the categories right matters just as much: foreign income and the expenses allocated against it must be classified according to U.S. tax rules, and a misclassification flows straight through to an incorrect credit.

Example: Maria's Foreign Tax Credit Scenario

  1. 1 Maria is a U.S. citizen living abroad. She earned $100,000 in foreign source income and paid $20,000 in foreign income taxes. Her total U.S. taxable income is $150,000, and her total U.S. tax liability before the credit is $30,000.
  2. 2 First, calculate the U.S. tax attributable to foreign income: ($30,000 * ($100,000 / $150,000)) = $20,000. Then, compare this to the actual foreign taxes paid ($20,000). The smaller of the two is $20,000.
  3. 3 Maria's Foreign Tax Credit is $20,000.
  4. 4 Maria can reduce her U.S. tax liability by $20,000 using the FTC. This fully offsets her U.S. tax on the foreign income, effectively preventing double taxation on that portion of her earnings. Any unused credit can often be carried back one year or forward ten years.

Source: IRS — Forms, Instructions & Publications · Last updated: April 2026

Frequently Asked Questions

Should I take the foreign tax credit or the deduction?
The foreign tax credit usually saves more because it reduces your tax dollar-for-dollar, while the deduction only reduces taxable income. The credit is better unless your foreign tax rate exceeds your US rate or you have very low income.
What is the foreign tax credit limitation?
The credit is limited to the portion of your US tax attributable to foreign-source income. If you paid more foreign tax than this limit, you can carry the excess back one year or forward up to ten years.
Do I need to file Form 1116 for the foreign tax credit?
You can skip Form 1116 and claim the credit directly on Form 1040 if your total creditable foreign taxes are $300 or less ($600 married filing jointly) and all taxes are reported on a payee statement. Otherwise, Form 1116 is required.