You can only take the foreign earned income exclusion if you live abroad. If you are a US resident, then you have a couple of options. The first is that you can take a business deduction for the foreign taxes paid. Another option is that you can take an itemized deduction on schedule A for the foreign taxes paid. This is less desirable because it will not lower self employment tax the way a business deduction would. The third option is to file form 1116 to get the tax credit. This can be complicated and the deduction can be limited depending on the percentage of foreign income to total income on your tax return. It also does not lower self employment tax the way a business deduction would.
