What is the Foreign Tax Credit and how can I use it?

U.S. expats who pay tax in a foreign country can apply a foreign tax credit towards their U.S. tax bill. Learn more about the Foreign Tax Credit, how it works compared to the Foreign Earned Income Exclusion (FEIE), and when you should use it.

U.S. expat taxes can be reduced significantly with the right use of credits, deductions and exclusions that ensure that Americans and green card holders abroad don't pay twice. The Foreign Tax Credit is one important tool, together with the better known Foreign Earned Income Exclusion.

[tedyoun]

good stuff Vincenzo! I'm planning on moving to the Philippines when I retire so I'll be looking you up then.

[p]

Can one use the foreign tax credit to offset capital gains on US stock investments?

[TranscendentalMindX]

I thought you couldn't do FEIE and FTC at the same time

[lettypsolis]

Sir, I’m still living in the US, but having a foreign bank account to build my retirement home outside US.

My question is regarding Form 1040, Schedule B to report the passive income ( Interests). The foreign bank did not issue a 1099-INT, but in the bank statement, they show that my account earned some interests and they withheld 20% of the interests and remitted it directly to the foreign country’s Revenue Services. So, can I report the NET interest in 1040 Schedule B and similarly in Form 8938 Part III, so that I don’t have to worry about claiming the foreign tax credit? If not, where is the best place to claim the foreign tax credit without a supporting 1099-INT ?

Thanks for the reply.

1 minute ago

[TheSamGerman]

If you only have foreign income, and claim the FEIE deduction of 102k (I think it's 104k now) can you still contribute to the roth IRA, or should you just focus on the traditional IRA?

[davidhewitt]

Thanks for the video. It sounded to me like you are suggesting around the 35-50 second mark of your video that you can take the foreign tax exclusion up to the “$100k or so” income threshold and then offset the tax you pay above that income with the foreign tax credit. I thought you could do one or the other, but not both. Can you please clarify?

[ericao]

I have lived in the UK for 5 years now and I always have used FEIE. But now I've been thinking about retirement, my paying into an IRA. I only make a small salary, no where near the FEIE limit. So i do my own taxes. I wonder if the FTC is something I need to look into then.

[ishaisha]

for US resident working abroad, can you confirm which of federal or state income tax is allowed to be treated as foreign tax credit?

[nateshk]

Hello Sir can I claim FTC while living here in the US?

[quizziewizzie]

Can one use the foreign tax credit to offset capital gains on US stock investments?