Foreign Tax Credit Filing — Form 1116
Form 1116 is used to claim the Foreign Tax Credit (FTC) — one of the most powerful tools for US expats in high-tax countries like the UK, Germany, France, and Australia. Unlike the FEIE, the FTC provides a dollar-for-dollar offset against your US tax liability for foreign income taxes paid to a foreign government. For many expats, the FTC eliminates US tax entirely. Filing it correctly — with correct income baskets, carryovers, and allocation — is essential.
Get started with your filingWho this is for
- ✓ US citizens or green card holders living in countries with income tax rates higher than the US
- ✓ Americans paying UK, German, French, Australian, or other high-rate income taxes
- ✓ Expats with investment income, dividends, or royalties taxed abroad
- ✓ Those who have chosen FTC over FEIE for their primary tax strategy
- ✓ Expats with unused foreign tax credit carryovers from prior years
What this filing may involve
Every situation is different. The forms below commonly apply — your specific filing may vary.
- 1 Form 1116 — Foreign Tax Credit (separate calculation for each income category/basket)
- 2 Form 1040 incorporating the FTC against US tax liability
- 3 Form 1116 AMT — if subject to Alternative Minimum Tax
- 4 Form 1116 carryover calculation — unused credits from prior years are tracked and carried forward
Documents usually needed
- 📄 Annual tax summary or assessment from foreign tax authority
- 📄 Proof of foreign taxes paid (tax receipts, assessments, or employer annual statement)
- 📄 Income records by category — earned income, passive income, general category
- 📄 Prior year Form 1116 (to carry forward unused credits)
How Nomadic.Tax works
AI-assisted preparation with licensed professional review — every time.
We categorise your foreign income into the correct FTC baskets (general, passive, etc.)
Foreign taxes paid are allocated to each income category and applied against US liability
Prior year carryovers are applied where available to reduce current year liability
A licensed CPA reviews the Form 1116 calculation before filing your complete return
When human review matters
- ⓘ The FTC is generally better than FEIE in high-tax countries — but the wrong election can cost thousands
- ⓘ GILTI (from controlled foreign corporations) has a separate FTC calculation with an 80% limitation
- ⓘ Foreign tax credit carryovers can be used for up to 10 years — they're valuable and must be tracked carefully
Deeper reading on NomadIcTax.org, our educational resource site
[INSERT: customer testimonial, e.g. "US expat in Germany in Munich, Germany, saved money and stress using Nomadic.Tax"]
- US expat in Germany, Munich, Germany
Relevant plans
Choose the package that best fits your situation, or view all plans.
- ✓ Everything in Standard
- ✓ Schedule C & SE for self-employment
- ✓ Multiple income sources and currencies
- ✓ Everything in Premier
- ✓ Foreign Earned Income Exclusion (Form 2555)
- ✓ Foreign Tax Credit (Form 1116)
- ✓ FBAR filing (FinCEN 114) included
- ✓ Everything in Expat
- ✓ Schedules D & E for investments and rentals
- ✓ Foreign asset reporting (Form 8938)
- ✓ FBAR filing (FinCEN 114) included
Frequently asked questions about Foreign Tax Credit Filing — Form 1116
What income categories does the FTC cover?
Form 1116 requires separate calculations for different income categories: general category (employment income), passive category (dividends, interest, rents), Section 951A (GILTI), and foreign branch income. You may need multiple copies of Form 1116 if you have income in multiple categories.
Can I use both FEIE and FTC?
Yes, with restrictions. You cannot claim FTC on the same income excluded via FEIE. However, if your income exceeds the FEIE limit, you can apply FTC to the excess. You can also use FTC on passive income such as dividends that FEIE doesn't cover.
What if I paid more foreign tax than my US liability?
Excess credits can be carried back one year and forward for up to 10 years. These carryovers are tracked and applied in future years to reduce US tax. Our system maintains carryover calculations across filing years.