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JeffB
Returning Member

Can I take Foreign Income Exclusion AND Foreign Tax credit

My wife is working abroad and qualifies as bona-fide resident with a work visa. I am living in US maintaining our prime residence (kinda sucks, I don't recommend it). She qualifies for the foreign income exclusion, which reduces her income $109,764. Can I also do a foreign tax credit since she is paying taxes there?

For simplicity, I am filing jointly, but it might make sense to file separately.

 

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2 Replies
Carl
Level 15

Can I take Foreign Income Exclusion AND Foreign Tax credit

No. You can take one or the other. But you can not take both. That is, assuming that you would "in fact" qualify to have the choice.

JeffB
Returning Member

Can I take Foreign Income Exclusion AND Foreign Tax credit

From IRS publication 54:

"Foreign tax credit or deduction. Once you choose to exclude foreign earned income, you can’t take a foreign tax credit or deduction for taxes on income you can exclude."

 

Can I get a foreign tax credit for taxes paid above the exclusion amount? Seems fair, but the paragraph quoted above mentions "If you do take a credit or deduction for any of those taxes in a subsequent year, your election for the foreign earned income exclusion will be revoked beginning with that year."  There is a good chance they will misread your intentions and drop the exclusion all together.

 

 

 

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