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IRC § 901 / Form 1116 FTC / Form 8833 Treaty

U.S. Expat DTAA & FTC Calculator

Simulate U.S. double tax avoidance, check treaty withholding rates, and estimate Foreign Tax Credits (Form 1116) limits.

Calculator Inputs

Enter the actual foreign tax paid or accrued on this income. Treaty rates do not automatically equal the final foreign tax imposed by the source country.
This is an educational estimate of the U.S. federal tax attributable to the foreign-source income. It is not a substitute for your actual marginal/average tax calculation or the Form 1116 limitation.

Calculation Results

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Input your foreign income details and click calculate to view the treaty positions.

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How the Foreign Tax Credit Actually Works

U.S. citizens and resident aliens generally report worldwide income for U.S. federal income-tax purposes. When qualifying foreign income taxes are paid or accrued, the Foreign Tax Credit can provide relief from double taxation. The credit is not simply the foreign tax amount automatically subtracted from total U.S. tax.

1. Determine the qualifying foreign tax

Not every foreign levy qualifies for the FTC. The tax must satisfy the applicable federal requirements, and treaty or domestic-law treatment can affect the result.

2. Determine the U.S. tax attributable to foreign-source income

The §904 limitation generally restricts the credit to the U.S. tax attributable to the relevant foreign-source taxable income.

3. Apply the correct income category

Form 1116 separates foreign income into applicable categories. Excess credits cannot simply be transferred between unrelated categories.

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Frequently Asked Questions (FAQ)

The Foreign Tax Credit can reduce U.S. federal income tax for qualifying foreign income taxes paid or accrued, subject to statutory limitations. Form 1116 generally calculates the credit separately by applicable income category. The credit is limited to the amount permitted under the applicable §904 limitation, so foreign tax paid does not automatically produce an equal U.S. tax reduction.

Form 2555 is used by eligible taxpayers to claim the Foreign Earned Income Exclusion for qualifying foreign earned income when the applicable requirements are met, including the tax-home and either bona fide residence or physical-presence test. Form 1116 is used to calculate a credit for qualifying foreign income taxes. The two provisions operate differently, and the FEIE is not a general exclusion for foreign interest, dividends, capital gains, or other passive income.

Generally, Form 8833 is used to disclose certain treaty-based return positions that override or modify an Internal Revenue Code provision. However, the IRS provides important exceptions. For example, certain reduced treaty rates on ordinary interest, dividends, rents, and royalties do not generally require Form 8833 disclosure. A required disclosure that is omitted can result in a penalty, generally $1,000 for an individual.

There is no single worldwide treaty cap. U.S. income tax treaties contain country-specific and income-specific rules, and some categories have different rates or exemptions. Real-property gains are generally addressed under the gains provisions of the applicable treaty and may be taxed by the country where the property is located. The foreign country's domestic tax rules and treaty procedures must also be considered.

Generally, unused qualifying foreign taxes may be carried back 1 tax year and then carried forward up to 10 tax years, subject to the applicable separate-category rules and exceptions. The IRS states that the carryback/carryover rules do not apply to unused taxes in the section 951A category.

Form 1116 uses separate income categories, including passive category income and general category income, along with other categories that can apply in particular circumstances. The §904 limitation is computed separately by applicable category, so excess foreign tax in one category generally cannot simply be used to eliminate U.S. tax on a different category.
Official IRS References

• IRS Publication 514 (Foreign Tax Credit for Individuals): irs.gov/p514
• IRS About Form 1116 (Foreign Tax Credit): irs.gov/form1116