Foreign Tax Credit Calculator

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

The Foreign Tax Credit (FTC) calculator helps U.S. taxpayers reduce their U.S. income tax liability on income earned abroad. It prevents double taxation, ensuring you aren't taxed by both the foreign country and the U.S. on the same income, which can significantly lower your overall tax burden.

The calculator typically determines the smaller of two amounts: the actual foreign income taxes paid or the U.S. tax liability attributable to foreign source income. This limitation is calculated by multiplying your total U.S. tax by a fraction: (foreign source taxable income / total U.S. taxable income).

A common mistake is claiming the foreign tax deduction instead of the credit, as the credit generally provides a greater tax benefit. Ensure you correctly categorize your foreign income and expenses per U.S. tax rules, as misclassification can lead to an incorrect credit amount.

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.

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