GLOSSARY · VISA-HOLDER FINANCE

Foreign tax credit

A dollar-for-dollar reduction of US income tax for qualifying income tax paid to another country on the same income. It is limited to the US tax on the foreign income, calculated separately for passive and general income, and unused amounts can be carried back one year or forward ten. Taxpayers may instead deduct foreign taxes, but not both in the same year.

Also called: FTC, Form 1116, credit for foreign taxes
FORMULA
Credit limit = US tax × (foreign-source taxable income ÷ total taxable income)
COMPUTE IT WITH YOUR NUMBERS
Nonresident spouse: §6013(g) election vs MFS/HoH →Should my nonresident spouse and I file jointly or separately?
LEARN IT PROPERLY
CHAPTER · TAXES, MONEY BACK HOME AND REPORTING · STRATEGIESWhen the US Taxes Your Income from EverywhereCHAPTER · TAXES, MONEY BACK HOME AND REPORTING · STRATEGIESRent, Interest and Gains from Home, and the Foreign Tax Credit
RELATED TERMS
Worldwide incomeTax treatyResident and nonresident alien (for tax)
SOURCES
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