Glossary · US Tax
Foreign Tax Credit
The Foreign Tax Credit gives US taxpayers a dollar-for-dollar credit against US tax for income tax paid to another country, preventing double taxation. It is claimed on Form 1116 and is often the best relief for Americans in high-tax countries like the UK.
FTC (Form 1116)
In more detail
The FTC credits foreign income tax you have paid against the US tax on the same income, so the same income is not fully taxed twice. For Americans in the UK — where tax rates are often comparable to or higher than US rates — the FTC frequently reduces US tax to little or nothing, and can generate excess credits that carry to other years. It is usually contrasted with the FEIE; the right choice depends on income type, level, and future plans.
Does Foreign Tax Credit apply to your situation?
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