Foreign Tax Credit Calculator

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.