For U.S. citizens living abroad, double taxation—paying taxes on the same income in both the U.S. and a foreign country—can be a significant financial burden. The Foreign Tax Credit (FTC) provides relief by allowing you to offset U.S. tax liability with foreign taxes paid, ensuring you don’t pay more than necessary.
At eTaxGlobal, we simplify the complex rules surrounding the Foreign Tax Credit, making sure you maximize your tax savings while remaining fully compliant. Whether you’re a full-time expat, a remote worker, or running a business abroad, our expert team ensures you get the full benefit of this essential tax credit.
The Foreign Tax Credit (FTC) is designed to prevent double taxation by allowing U.S. taxpayers to claim a credit for income taxes paid to a foreign government. Instead of deducting foreign taxes as an expense, the FTC directly reduces your U.S. tax bill dollar for dollar—a far more powerful tax-saving tool.
This credit applies to income taxes imposed by a foreign country and can significantly lower or even eliminate your U.S. tax obligation, depending on your situation.
To claim the Foreign Tax Credit, you must meet the following eligibility requirements:
You paid or accrued foreign taxes to a recognized foreign government.
The taxes must be based on income earned, not other forms of taxation such as real estate, sales, VAT, or wealth taxes.
You must file Form 1116 to claim the credit (unless you qualify for the exemption that allows you to claim without Form 1116).
If your foreign taxes exceed your allowable credit, you may be able to carry the excess back to the previous year or forward for up to 10 years, ensuring you maximize your tax benefits over time.
The FTC is subject to a limitation to ensure that the credit does not exceed the portion of your U.S. tax liability related to foreign income.
The credit is calculated using the following formula:
At eTaxGlobal, we take the stress out of tax filing by combining cutting-edge technology with expert tax guidance. Here’s how we help:
We specialize in U.S. expat tax laws and understand the tax treaties and regulations that impact your Foreign Tax Credit eligibility.
We analyze your income sources, foreign tax payments, and IRS regulations to maximize your credit and minimize your liability.
Our streamlined process ensures accurate, timely submission of Form 1116, so you stay compliant without the hassle.
We prepare thorough documentation to support your claim in case of an IRS inquiry.
If you’re paying foreign income taxes, don’t leave money on the table. The Foreign Tax Credit can significantly reduce your U.S. tax bill—but only if it’s filed correctly.
Let’s make tax season easier. Contact us today and unlock the full potential of your Foreign Tax Credit.
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