FTC Explained: Slash Your US Taxes Abroad! #shorts

Added: 2026-05-28

[00:00:00]The foreign tax credit provides a dollar-for-dollar reduction of your US tax liability, meaning every dollar you pay in eligible foreign taxes reduces your US tax by the same amount. So, for example, if you owe $10,000 in US taxes, but you paid $8,000 in eligible foreign taxes, you can claim an $8,000 foreign tax credit, which reduces your US tax liability to $2,000. The foreign tax credit covers any type of income that is subject to both US and foreign taxes, including earned and unearned income, like dividends, capital gains, and rental income. Also, there is no residency or physical presence required.

[00:00:38]Following types of foreign taxes qualify for the foreign tax credit. These are direct taxes on your earnings, whether from wages, dividends, interest, or rental income. Two, taxes on foreign business income and investment income.