Foreign Tax Credit vs FEIE 2027 Comparison Calculator

FTC (Foreign Tax Credit) and FEIE (Foreign Earned Income Exclusion) are alternative US expat tax tools. FTC dollar-for-dollar offsets US tax with foreign tax paid; FEIE excludes income from US tax computation. The right choice depends on host-country tax rate, income type, and 5-year strategy.

Foreign-Earned Income ($)

Effective Foreign Tax Rate %

Effective US Marginal Rate %

FEIE Limit ($130,000 in 2027)

Foreign Housing Cost ($)

Contributing to Foreign Pension Eligible for FTC?

FEIE Total Tax

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FTC Total Tax

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Winner

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Foreign Tax Paid	—
FEIE PATH
FEIE + Housing Excluded	—
US Tax on Remainder	—
FEIE Total Tax	—
FTC PATH
Foreign Tax Credit	—
US Tax After Credit	—
FTC Total Tax	—
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Savings vs Other Strategy	—

FEIE (Foreign Earned Income Exclusion) and FTC (Foreign Tax Credit) are alternative tools for US expats. FEIE excludes up to ~$130,000 of foreign-earned income from US tax computation. FTC dollar-for-dollar reduces US tax by the amount of foreign tax paid on the same income. Most US expats use a combination, but the primary election affects 5+ years of tax filings.

When FEIE Wins

Low-tax countries: UAE, Saudi Arabia, Singapore, Hong Kong, Qatar, Bahamas, Cayman Islands. In these jurisdictions, there's little or no foreign income tax to credit. FEIE eliminates US tax on the first $130k+ housing — saving 22-37% federal. FEIE also wins when foreign tax is on a different basis than US (e.g., territorial vs worldwide).

When FTC Wins

High-tax countries: Germany, France, UK, Italy, Denmark, Sweden, Belgium, Australia, Japan. Foreign tax often exceeds US tax on the same income — FTC fully credits and excess carries forward 10 years. FTC also wins for income types NOT covered by FEIE (investment income, pensions, RSU/options vesting on foreign-source service, capital gains).

The 5-Year FEIE Rule

Once you elect FEIE, the election continues in subsequent years until you revoke. Revocation triggers a 5-year ban on re-electing without IRS Letter Ruling (typical cost $10k+ filing fee plus attorney time). Strategy: choose carefully in year 1; many expats default to FTC for flexibility unless FEIE is clearly superior.

Last updated May 2026. Sources: IRS — Foreign Tax Credit, IRS Form 2555