The Foreign Tax Credit prevents double taxation by offsetting US income tax with taxes paid to foreign governments, capped by the IRC §904 limitation formula.
General category (wages/consulting/self-employed) and Passive category (dividends/interest/capital gains) cannot cross-subsidize. Each requires its own Form 1116 calculation.
Allowable credit = US Tax Before Credits × (Foreign Source Taxable Income ÷ Total Worldwide Taxable Income). You cannot use foreign taxes to reduce taxes on US-source income.
Passive income taxed by a foreign country at a higher rate than the top US tax bracket is automatically reclassified into the General category basket.
Worldwide & Foreign Income Inputs
Foreign Baskets Breakdown
§904 Limitation Fractions
For accuracy, enter the actual amount of foreign income tax paid on your foreign earned income. The estimate assumes foreign taxes are proportional to the earned-income share of General-category income.
Reg. §1.861-8/-9 apportionment (including the asset method for interest expense) is not implemented. If your situation involves significant interest expense or specific allocations, the limitation may differ.
All calculators are deterministic simulation tools cross-verified against official IRS publications: Rev. Proc. 2025-32, Pub 15-T (2026), Pub 54, Pub 514, and Form 2555 / 1116 instructions.
Engines model exact integer-cents arithmetic, §904 fraction limitations, Social Security wage base caps ($184,500 for TY2026), 50 state tax schedules, and 14 local jurisdictions.
All computations execute locally in your browser. No wage, income, travel, or financial account data is transmitted to external servers during calculation.