Tax
Foreign Tax Credit (FTC)
Also known as: FTC, Foreign Tax Credit, Form 1116
Quick answer
IRS — Foreign Tax Credit · checked 9 Nov 2026
The IRS distinguishes taking foreign taxes as an itemised deduction from taking them as a credit. Only qualifying taxes count, and the credit's limitation can leave foreign tax uncredited.
A taxpayer can assess the exclusion and credit rules together, but cannot claim a credit for taxes on excluded income. Earning more than the exclusion ceiling does not by itself prevent a FEIE claim. Country-level headline tax rates are insufficient to calculate an individual's remaining US bill.
Sources
- IRS — Foreign Tax Credit · checked 9 Nov 2026
Related terms
FEIE (Foreign Earned Income Exclusion)
The Foreign Earned Income Exclusion allows eligible US taxpayers to exclude up to $132,900 of qualifying foreign earned income for tax year 2026. A foreign tax home and either the bona fide residence or physical presence test are required. The physical presence test requires 330 full days in foreign countries during a consecutive 12-month period. The exclusion does not reduce self-employment tax.
Double Taxation
International double taxation can arise when more than one jurisdiction taxes the same income. Relief may come from a treaty, a domestic foreign-tax credit or an exemption, subject to their conditions. A foreign-tax payment does not automatically eliminate all tax in the other country, and relief is not limited to countries with a treaty.
Tax Treaty
A tax treaty is an agreement between jurisdictions that can allocate taxing rights, reduce specified taxes and provide relief from double taxation. Entitlement depends on the treaty's text, residence and other conditions. Treaties and protocols have their own effective dates; signing a treaty is not the same as bringing it into force.
IRS Streamlined Filing Compliance Procedure
The IRS Streamlined Filing Compliance Procedures are available to eligible taxpayers whose foreign-income or asset-reporting failures were non-wilful. The foreign offshore procedure requires the relevant three years of tax returns, six years of FBARs and a signed certification. Eligibility includes a specific non-residency test; living abroad alone is insufficient.
Deeper guides
US Expat Tax Guide 2026: FEIE $132,900, FTC, and Zero-Tax Strategies
Comprehensive 2026 US expat tax guide. FEIE exclusion: $132,900 (single) / $265,800 (married). Combined with standard deduction: $149,000 zero-tax threshold. FTC, self-employment tax, Totalization Agreements, and destination tax regimes (Beckham Law, Impatriate, IFICI) explained.
FEIE vs. Foreign Tax Credit in 2026: Which Saves You More? ($132,900 Exclusion)
2026 FEIE raised to $132,900. Compare the Foreign Earned Income Exclusion and Foreign Tax Credit with worked examples by income level. Includes FBAR and FATCA requirements.
Digital Nomad Tax Guide 2026: FEIE, FTC, and Country-Specific Strategies
Double taxation, tax treaties, FEIE, Foreign Tax Credits, and country-specific tax regimes — the complete 2026 tax guide for digital nomads.
Tax Optimization Strategies for Expats (2026)
Legal tax optimization for US expats — FEIE ($132,900), Foreign Tax Credit, tax treaties, state exit strategies.
Portugal vs Spain Tax for Americans 2026: IFICI vs Beckham Law Compared
Side-by-side US-citizen tax comparison: Portugal IFICI (20% flat, 10 years, narrow eligibility) vs Spain Beckham (24% flat, 6 years, broader eligibility). FEIE/FTC stacking, scenario tables at $50K/$100K/$200K, regime eligibility rules.