The foreign tax credit is available to US citizens and resident aliens who pay income taxes imposed by a foreign country. It is used to reduce your US tax liability to ensure you are not paying taxes twice on the same income. You deduct the taxes paid in the foreign country on form 1116 as a credit against your US taxes. Generally, a tax credit is more beneficial to the taxpayer, than a deduction, as it is a dollar for dollar reduction of tax. If you are able to itemize deductions you may elect to include the foreign tax as a deduction on Schedule A rather than as a credit on form 1116. The tax credit also shows on the Schedule 3. Form 1116 is required to claim the credit.
