The Foreign Tax Credit (FTC) helps U.S. taxpayers avoid double taxation by reducing U.S. income tax for foreign income taxes paid. It applies to taxes directly based on income but not to social security, sales, or property taxes. The credit offsets U.S. taxes only on foreign-sourced income.
Foreign Tax Credits (FTC) are a U.S. tax provision that allows U.S. taxpayers, including expatriates, to reduce their U.S. federal income tax liability by the amount of income taxes paid to a foreign government on foreign-sourced income. This credit is designed to prevent double taxation—being taxed on the same income by both the U.S. and a foreign country.
