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.