Reducing Your U.S. Income Tax One Euro At a Time

The U.S. foreign tax credit ("FTC") is the way the IRS and U.S. Treasury allow U.S. persons who pay foreign income tax on their foreign income to reduce their U.S. tax liability on that same income when it's included on that U.S. person's U.S. Federal income tax return. This tax credit significantly reduces the double taxation that might occur, but doesn't provide a 100% recovery of foreign taxes paid.

The foreign tax credit computation has three main components - (1) foreign source income and its categorization, (2) expenses allocated and apportioned to foreign source income, and (3) foreign income taxes. We can help you increase your foreign tax credit by reviewing and offering advice on increasing foreign source income, reducing expenses allocated or apportioned to foreign source income, or substantiating foreign income taxes paid.

Let us help you increase your FTC by:

• Preparing your Form 1118 as part of your U.S. international tax compliance
• Increasing foreign source income in the right category e.g., foreign title passage, look through, and passive vs. general limitation classification
• Analysis of foreign source income inclusions e.g., dividends, and deemed dividends (Subpart F and IRC Section 956 Investment of Earnings in U.S. Property)
• Documenting foreign subsidiary earnings and profits and foreign income taxes paid

Foreign Tax Credit

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