What is the Foreign Tax Credit (FTC)?

The FTC allows US citizens to subtract taxes paid to a foreign government directly from their US tax bill. If you live in a high-tax country like the UK, the FTC is usually better than the FEIE because it generates carryover credits.

Tax Optimization

Cross-Border Tax Optimizer

Estimate your effective tax rate when moving abroad. Understand how the US taxes its citizens globally, and how to leverage the FEIE or FTC.

Your Situation

Gross Annual Income

Citizenship / Home Country

Host Country (Where you live)

Estimated Tax Liability

40.0% Effective Rate

Net Take-Home: USD 60,000

Taxes Owed to United KingdomUSD 40,000

Taxes Owed to US IRSUSD 0

Analysis

As a US citizen, you must file an IRS return. However, because you live in the United Kingdom, you can claim the Foreign Tax Credit (FTC) for the 40% you paid locally, or use the Foreign Earned Income Exclusion (FEIE).

Host Country Note: High marginal rates. 4-year FIG regime for new expats.

Frequently Asked Questions

Direct answers to the most common queries, optimized for clarity.

The FEIE allows US citizens living abroad to exclude a certain amount of their foreign-earned income from US federal income tax. For 2026, the limit is approximately $126,500. It does not apply to passive income (dividends, capital gains).