DanielV01
Expert Alumni

Get your taxes done using TurboTax

It depends.  And chances are you will need to choose.  The bottom line is you will want to use the provision that results in the lowest tax.  If you use the Foreign income exclusion with $25,000 of income (provided you qualify to do so), your Federal Tax will be $0.  However, you could have a state tax issue, depending on the state's income tax rules from the state you lived in prior to your move.  This could be the case if that state has an income tax, does not recognize the income exclusion, and still considers you to be a legal resident of the state.

 

If UK taxes are higher than what you would pay in US taxes, the Foreign Tax Credit will also result in a Federal Tax of $0, and will likely provide less state tax complications.

 

See the following two IRS websites for a comparison of each claim:  Foreign Tax Credit | Internal Revenue Service and Foreign Earned Income Exclusion

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"