Foreign Tax Credit Calculator 2026 (Form 1116)

Calculate your 2026 Foreign Tax Credit under Internal Revenue Code Sections 901 to 904 and IRS Form 1116. Applies the Section 904 limit (foreign source taxable income / total taxable income × US tax), shows allowed credit and excess carryback (1 year) and carryforward (10 years), and compares the FTC against the Foreign Earned Income Exclusion alternative under § 911 (mutually exclusive on the same income). Free, private, runs entirely in your browser.

Filing & Income Category

Filing status Determines US tax brackets when standard rate is used for comparison.

Foreign income category (Form 1116 basket) Each category is a separate Section 904 basket — no cross-crediting between baskets.

Income Inputs (USD-equivalent)

Foreign source taxable income ($) Net foreign income in this basket after allocated deductions. Form 1116 line 7.

Foreign tax paid or accrued ($) Income, war profits, and excess profits taxes paid to a foreign country (USD-equivalent).

Total US taxable income (worldwide) ($) Form 1040 line 15. Includes foreign source income before FTC.

Total US income tax before credits ($) Form 1040 line 24 before FTC. Includes regular tax + AMT (modified for FTC computation).

Carryback & Carryforward

Prior-year FTC carryforward ($) Unused FTC from prior years (up to 10 years old). Form 1116 Schedule B.

Show FEIE comparison? FEIE under § 911 excludes up to $130,000 of foreign earned wages 2026. FEIE and FTC are mutually exclusive on the same income.

Allowed Foreign Tax Credit (2026)

Section 904 Limit

Excess Carryforward (10 yrs)

Net US Tax After FTC

Form 1116 Calculation Breakdown

Step	Amount

2026 IRC §§ 901–904 Form 1116 rules: The FTC limit under § 904 = (foreign source taxable income / total taxable income) × total US tax. The credit allowed = lesser of (foreign tax actually paid OR Section 904 limit). Excess foreign tax can be carried back 1 year and carried forward 10 years within the same income category (basket). The FTC and Foreign Earned Income Exclusion under § 911 are mutually exclusive on the same dollars of income — the FTC is generally better when foreign tax rates exceed US rates, while the FEIE is better when foreign tax is low. § 951A GILTI uses a separate basket with an 80% haircut on assigned foreign tax.

Source: IRS Form 1116 Instructions 2026 + IRS Publication 514. Last updated: May 3, 2026.

What Is the Foreign Tax Credit (Form 1116)?

The Foreign Tax Credit (FTC) under Internal Revenue Code Sections 901 to 904 is a dollar-for-dollar credit against US income tax for income, war profits, and excess profits taxes paid or accrued to a foreign country or US possession. It prevents double taxation of the same income at both foreign and US levels. The credit is claimed on IRS Form 1116 (or Form 1118 for corporations) and is the primary mechanism US citizens, resident aliens, and US businesses use to neutralize foreign tax bills on income they must also report to the IRS. Source: IRS Publication 514 (irs.gov).

Crucially, the FTC is limited under Section 904 to the proportion of US tax that the foreign source income represents of total taxable income. If foreign tax rates exceed US rates, the excess foreign tax above the Section 904 limit is not refunded — it can only be carried back 1 year and carried forward 10 years within the same income category. This calculator implements the standard Form 1116 logic for individual taxpayers. Last updated: May 3, 2026.

Section 904 Limit and the Foreign Tax Credit Formula

The Section 904 limit caps the FTC at: (foreign source taxable income ÷ total taxable income) × total US income tax. If a single US citizen earns $40,000 of foreign source dividends and pays $9,000 of foreign tax, with $120,000 of total taxable income and $22,000 of US tax, the Section 904 limit is ($40,000 ÷ $120,000) × $22,000 = $7,333. The allowed FTC is the lesser of $9,000 (foreign tax paid) or $7,333 (limit) = $7,333. The remaining $1,667 is excess foreign tax — carry it back 1 year first, then forward up to 10 years within the same passive basket.

The FTC is computed separately for each Section 904 income category ("basket"): passive category (interest, dividends, capital gains, royalties), general category (active wages, business income, services), GILTI under Section 951A (with an 80% haircut on assigned foreign tax), foreign branch income, and treaty resourced income. Excess foreign tax in one basket cannot offset a US tax bill on income in another basket — a critical constraint that limits planning flexibility for taxpayers with mixed foreign income types.

FTC Carryback (1 Year) and Carryforward (10 Years)

Excess foreign tax above the Section 904 limit does not vanish — it carries back to the immediately preceding tax year first, then forward up to 10 future tax years within the same income category. The carryback is mandatory if usable in the prior year (file Form 1040X to claim a refund). Unused carryforwards expire after 10 years and become permanently lost. Strategic planning often involves accelerating foreign income into high-foreign-tax years to absorb the carryforward before expiry, or shifting source of income to balance basket utilization.

Married taxpayers filing jointly aggregate spouses' foreign income and tax in a single Form 1116 per basket. After divorce or a switch to MFS, prior-year FTC carryforwards generated jointly are split proportionally between spouses based on contribution. Maintain detailed records — the IRS audits Form 1116 carryforwards heavily on amended returns.

FTC vs Foreign Earned Income Exclusion (§ 911) — Mutually Exclusive

The Foreign Tax Credit and the Foreign Earned Income Exclusion under IRC Section 911 are alternative mechanisms — they cannot both apply to the same dollars of income in the same year. The FEIE excludes up to $130,000 (2026) of foreign earned wages or self-employment income from US tax altogether (plus a foreign housing exclusion). The FTC instead taxes the foreign income but credits the foreign tax paid. The right choice depends on the foreign country's effective tax rate.

Rule of thumb: choose the FEIE in low-tax countries (UAE, Saudi Arabia, Singapore, Hong Kong — where § 911 excludes income that the foreign country didn't tax much, leaving room for additional retirement contributions and itemized deductions). Choose the FTC in high-tax countries (UK, France, Germany, Australia, Canada — where the foreign tax bill exceeds what the US would have owed, and the FTC neutralizes the entire US bill plus generates carryforward). For US tax residents with mixed sources, partial elections per category may be optimal — the FEIE election is also revocable but, once revoked, cannot be reclaimed for 5 years without IRS consent.