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)
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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 CreditRELATED TERMS
SOURCES
- Publication 514, Foreign Tax Credit for Individuals. Internal Revenue Service.