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🌍 Foreign Tax Credit Calculator

Enter your worldwide income, US tax and foreign tax paid to see the Form 1116 credit you can actually claim — and how much carries forward.

✏️ Your Income & Tax

💰 Your Results

Allowable Foreign Tax Credit$0
FTC Limitation$0
Carryforward$0
Net US Tax After Credit$0
Share of Foreign Tax Recovered0%

Worked Examples

ScenarioForeign Tax CreditFTC Limit (US tax × foreign %)Carryforward
Single, $90k total income, $12k foreign tax$7,200$7,200$4,800
Single, $90k total income, $4k foreign tax$4,000$7,200$0
MFJ, $150k total, $18k foreign tax$12,000$12,000$6,000
High-tax country: $9k US, $11k foreign$4,950$4,950$6,050

The credit is the lesser of foreign taxes actually paid and the FTC limitation. When you paid more foreign tax than the US would levy on that income, the excess does not disappear — it becomes a carryback (1 year) or carryforward (10 years). Each row above is produced by the same formula this page runs.

Formula & Guide

FTC = min(foreign taxes paid, US tax × (foreign-source income ÷ worldwide income))
The limitation prevents a credit from wiping out US tax on US-source income.

How to use this calculator

  1. Enter your total worldwide income (US + foreign) in the first field.
  2. Enter the US tax you would owe on that total income — the calculator does not compute it for you, so read line 16 of your draft Form 1040 or your tax software.
  3. Enter the foreign taxes you actually paid or accrued, converted to dollars.
  4. Enter the percentage of your income that came from foreign sources.
  5. Press Calculate to see your allowable credit and any carryforward.

Credit vs exclusion — which do you use?

FeatureForeign Tax Credit (Form 1116)FEIE — Exclusion (Form 2555)
What it doesDollar-for-dollar credit against US taxExcludes foreign earned income from US tax
Income ceilingNo ceilingCapped (about $130,000 for 2025)
Best whenForeign tax rate is high or income exceeds the exclusion capYou live abroad and earn under the cap with low local tax
InteractionYou may elect exclusion for some income and credit for the restTaxes on excluded income are not creditable

Two categories matter: the credit is computed separately for the general limitation basket ' (salary, most business income) and the passive basket (interest, dividends, rents). A high-tax passive ' bucket generally cannot offset US tax on your salary — the baskets do not cross.

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When You Need the Foreign Tax Credit

If you are a US citizen or resident and you paid income tax to a foreign country, you face double taxation: the foreign government taxes the income where it is earned, and the US taxes it again because US citizens are taxed on worldwide income. The foreign tax credit (FTC), claimed on Form 1116, is the main relief. It is not a deduction — it reduces your US tax dollar for dollar, which makes it far more valuable than writing the foreign tax off.

The single most common error is claiming the full foreign tax paid. The IRS caps the credit at the US tax attributable to your foreign-source income. If you earned $60,000 abroad and $40,000 in the US, only 60% of your US tax is eligible to be offset. Anything above the limit is carried forward up to ten years (or back one), so it is deferred, not lost.

Who should use it

  • Expats earning above the FEIE exclusion cap whose foreign country also taxes them.
  • Investors holding foreign stocks that withheld dividend tax at the source.
  • Remote workers who pay local tax where they live but file a US return.
  • Dual residents with income sourced in both countries under a tax treaty.

Real-world reference points

Typical withholding rates: Canada and the UK withhold 0–15% on dividends paid to US investors; France withholds 12.8% (reduced to 15% treaty rate on some income); Japan withholds about 20.3% on dividends. Because the US taxes qualified dividends at 0–20%, a high foreign withholding rate often exceeds the US tax on the same income — creating a carryforward. Countries with no income tax (UAE, Cayman, Bermuda) generate no credit, because there is no foreign tax to credit.

Frequently Asked Questions

What is the difference between a credit and a deduction for foreign taxes?
A credit reduces your US tax dollar for dollar; a deduction only reduces the income the tax is computed on. A $1,000 credit saves $1,000 of tax; a $1,000 deduction saves $1,000 times your marginal rate, roughly $220 to $370. You may choose to deduct instead of claiming the credit, but the credit is almost always better unless the credit is severely limited.
Can I claim both the FEIE and the foreign tax credit?
Yes, but not on the same dollars. Income you exclude with Form 2555 is not creditable. In practice you allocate: use the exclusion on earned income up to the cap and claim a credit on foreign income above the cap, on passive income, or on taxes from a high-tax country where the credit is worth more than the exclusion.
What is the foreign tax credit limitation?
The credit cannot exceed your US tax multiplied by the fraction of your income that is foreign-source. If 40% of your income is foreign, at most 40% of your US tax can be offset. The limitation is applied separately per basket (general vs passive), so a credit in one basket cannot offset tax in another.
What happens to foreign tax above the limit?
The excess becomes a carryover. You may carry it back one year and forward up to ten years, claiming it in a later year when your limitation is high enough to absorb it. Unused carryovers expire after the ten-year window.
How do I convert foreign tax to dollars?
Use the exchange rate on the day you paid or accrued the tax. The IRS accepts any consistent, clearly documented method; published yearly average rates are commonly used. Attach a schedule showing the rates and dates if the amounts are material.

⚠️ Important: This calculator estimates the foreign tax credit limitation. The actual credit requires Form 1116 and separate computations per basket (general and passive), plus currency conversion on the date of payment. It is not tax advice — confirm figures with a qualified tax professional.