IRS Form
IRS Form 1116: Foreign Tax Credit
Form 1116 is the US tax form used to claim the Foreign Tax Credit. It lets US taxpayers offset their US tax with income taxes already paid to a foreign country such as the UK, and is one of the main mechanisms for relieving double taxation on foreign income.
The short answer
What Form 1116 is
Form 1116 is the US tax form on which individuals claim the Foreign Tax Credit. The credit is a mechanism that allows US taxpayers to offset their US income tax with income taxes they have already paid to another country. For an American living in the UK, that typically means UK income tax paid on the same income the US also seeks to tax.
Because the United States taxes its citizens on worldwide income, the same earnings can fall within both the US and the UK tax systems. The Foreign Tax Credit is one of the primary tools for preventing that income from being taxed twice.
Why Form 1116 exists
Form 1116 exists to operationalise the Foreign Tax Credit within the US return. Rather than exempting foreign income, the credit recognises the tax a taxpayer has already paid abroad and reduces the US liability accordingly. This preserves the US worldwide-taxation principle while still relieving the double taxation that principle would otherwise create.
Who generally files Form 1116
- US citizens and residents who have paid or accrued income tax to a foreign country such as the UK.
- Americans in the UK seeking to offset US tax with UK tax already paid on the same income.
- Taxpayers deciding between the Foreign Tax Credit and the Foreign Earned Income Exclusion.
- Dual citizens managing overlapping US and UK tax on investment or employment income.
How it fits
How Form 1116 fits into the filing process
Identify foreign income and foreign tax paid
Establish which income is foreign-source and what income tax you have paid or accrued to the foreign country on it.
Categorise the income
Group the foreign income into the categories the credit uses, since the credit is calculated by category.
Calculate the credit
Use Form 1116 to work out the allowable credit against your US tax, reflecting the foreign tax already paid.
File with your income tax return
Include the completed form with your US income tax return so the credit is applied to your overall liability.
Key facts at a glance
- Form name
- Foreign Tax Credit
- Purpose
- Relieve double taxation via a credit
- Filed with
- Your US income tax return (IRS)
- Alternative mechanism
- Foreign Earned Income Exclusion (Form 2555)
- Related concept
- US–UK tax treaty relief
How Form 1116 relates to other filings
Form 1116 sits at the centre of the double-taxation question for Americans abroad. It is frequently weighed against the Foreign Earned Income Exclusion claimed on Form 2555, and it interacts with the relief available under the US–UK tax treaty. Choosing among these mechanisms is a planning decision, which is why we cover the comparison in detail and provide a calculator to explore the trade-offs.
Related resources
Frequently asked questions
Form 1116 is used to claim the Foreign Tax Credit, which lets US taxpayers offset US tax with income taxes they have already paid to a foreign country such as the UK, reducing double taxation on the same income.
They are alternative mechanisms for relieving double tax on foreign income and are often compared. The Foreign Tax Credit on Form 1116 credits foreign taxes paid, while the exclusion on Form 2555 excludes qualifying earned income. Which fits best depends on your circumstances.
Both address double taxation, but through different routes. The credit is a domestic US mechanism, while the treaty allocates taxing rights between the countries. They can interact, which is why professional review is valuable.
It is completed as part of your US income tax return, supporting the calculation of any Foreign Tax Credit you claim.
Claiming the Foreign Tax Credit?
We help Americans in the UK apply the Foreign Tax Credit correctly and choose the right relief mechanism for their situation.