A US Tax Person who is a Tax resident, Green card holder in the United states, could also be a Tax resident for the year in another Foreign country. They may end up paying taxes on the same income twice, also known as (Double taxation). In order to avoid Double taxation, US Tax Individuals can claim Foreign Tax Credit Form-1116 on their Tax return with countries, the United States has Foreign Tax Treaty. Claiming Foreign Tax Credit is another benefit given to the Taxpayer apart from the Foreign earned income Exclusion (FEIE). The Taxpayer can use both Foreign Earned Income exclusion (FEIE) and Foreign Tax credit (FTC) in the same year on the Tax return, subject to limitations.
In order to figure out the maximum benefit, an optimization will be needed in the 1st Year of departure. In this blog, let us explore in more detail, Foreign tax credit on Form 1116.