Foreign Tax Credit (FTC)

Definition

Sections 901 through 909 allow U.S. taxpayers to claim a credit for income taxes paid to foreign countries to mitigate double taxation. The credit is limited to the U.S. tax on foreign-source income computed in each Section 904(d) category basket.

Examples

• A U.S. citizen working abroad pays $20,000 of foreign income tax and may credit a portion against U.S. tax on the same income.