What is the foreign tax credit, and do I qualify?

What is the foreign tax credit, and do I qualify?

The Foreign Tax Credit is a credit for income taxes paid to a foreign country, and it is designed to help minimize the burden of double-taxation.

In order to qualify for the foreign tax credit, taxpayers must meet all four of the following requirements:

  • The tax must be imposed on you by a foreign country.
  • You must have paid or accrued the tax.
  • The tax must be the legal and actual foreign tax liability.
  • The tax must be an income tax.

Keep in mind that the foreign tax credit only applies to taxes imposed on foreign income. You can’t claim a credit for taxes you may have paid on U.S.-sourced income.  You can’t claim the credit for any taxes you paid that could be refunded or forgiven, either.

All About Randall Brody
Randall is the Founder of Tax Samaritan, a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the other unique tax issues that apply to taxpayers. Here, they help taxpayers save money on their tax returns.

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