The foreign tax credit (FTC) prevents double taxation when you pay income tax to a foreign country. The credit reduces your US tax dollar-for-dollar, subject to a limitation based on the proportion of your income that is foreign-sourced. Use this tool to calculate your Form 1116 credit limit.
Income & Tax Inputs — 2026
Income earned in or sourced from foreign countries
Creditable foreign taxes (income taxes only, not VAT/sales tax)
From Form 1040 before any credits (line 17)
How to Calculate the Foreign Tax Credit on Form 1116
The foreign tax credit on Form 1116 involves three key numbers: the foreign taxes paid, the FTC limitation, and the allowable credit. The limitation ensures you cannot use foreign tax credits to offset US tax on US-source income.
The FTC Limitation Formula
FTC Limit = US Tax Before Credits × (Foreign Source Income / Total Income). For example: $28,000 US tax × ($60,000 foreign income / $150,000 total income) = $11,200 FTC limitation. Even if you paid $15,000 in foreign taxes, only $11,200 is creditable this year. The remaining $3,800 can be carried forward up to 10 years.
High-Tax vs. Low-Tax Countries
If you live in a high-tax country (France, Germany, UK), your foreign taxes often exceed the FTC limitation — you'll have excess credits to carry forward. If you live in a low-tax country (UAE, Singapore), your foreign taxes may be less than the limitation, and the full foreign tax is creditable.
Credit vs. Deduction
Instead of the credit, you can elect to deduct foreign taxes as an itemized deduction. The deduction is simpler (no Form 1116) but less valuable — it reduces taxable income by the tax amount rather than reducing tax dollar-for-dollar. The credit is almost always more valuable unless your effective rate is very high.
FAQ
What is the foreign tax credit?
The foreign tax credit (FTC) is a dollar-for-dollar reduction in US tax for income taxes paid to a foreign country. It prevents double taxation when you earn income abroad and pay tax to both the foreign country and the US. The credit is claimed on Form 1116 (or Schedule 3 Line 1 if you qualify for the simplified method with under $300/$600 of foreign taxes).
What is the FTC limitation?
The FTC is limited to the portion of your US tax attributable to foreign income. The formula is: FTC Limit = US Tax × (Foreign Income / Total Income). You cannot use the credit to offset US tax on domestic income. Excess credits can be carried back 1 year or carried forward 10 years.
Should I take the foreign tax credit or deduction?
Generally, the credit is more valuable (dollar-for-dollar reduction) than the deduction (reduces taxable income at your marginal rate). However, if you have a low effective US tax rate or significant foreign taxes, the deduction may sometimes produce a better result. This calculator shows both options.
Can I take both FEIE and the foreign tax credit?
You can use both, but NOT on the same foreign income. The FEIE excludes up to $134,000 (2025 estimate) of foreign earned income from US tax entirely. Any remaining foreign income not excluded by the FEIE can still have its taxes credited via FTC. Most expats choose the combination that minimizes total tax.
Is this calculator free?
Yes, completely free with no signup required. For educational purposes only. International tax is highly complex. Consult a tax professional specializing in expat taxes before filing Form 1116. 2026 tax rules.