Foreign Tax Credit Form 1116
FTC: US offsets US tax dollar-for-dollar with foreign income tax paid. Limited to US tax on foreign income. Use Form 1116 or election under $300/$600 simple rule.
| Foreign source income | — |
| Foreign tax paid | — |
| Foreign income ratio | — |
| FTC limit (Form 1116) | — |
| Foreign Tax Credit allowed | — |
| Carryover (1 back / 10 fwd) | — |
| Net US tax after FTC | — |
The Foreign Tax Credit (FTC) on Form 1116 lets you claim a dollar-for-dollar credit against US tax for income tax paid to a foreign country. The credit is limited to the portion of US tax attributable to foreign source income.
FTC vs Foreign Earned Income Exclusion
FTC: take credit for foreign tax paid. FEIE: exclude $130,100 (2026) of foreign earned income from US tax. FTC usually better in high-tax countries (UK, DE, FR, AU). FEIE better in low-tax (UAE, Saudi, BVI, Singapore).
The $300/$600 Election
If foreign tax is under $300 ($600 MFJ), and all income is passive (dividends, interest), you can take FTC directly on Form 1040 without filing Form 1116. Simpler — no carryover tracking.
Form 1116 Categories
Five categories: passive income, general income, foreign branch, GILTI, lump-sum distributions. Each has its own limitation calculation. Mixing categories requires multiple Form 1116s.
Carryover Rules
Excess foreign tax not credited this year carries back 1 year and forward 10 years. Track on Form 1116 Schedule. Document carryovers across multiple tax years.
Last updated May 2026. Sources: Form 1116 Instructions, IRS Pub 514.