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
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 |
| Recommended | Credit |
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 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 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 Maria's Foreign Tax Credit is $20,000.
- 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?
What is the foreign tax credit limitation?
Do I need to file Form 1116 for the foreign tax credit?
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