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FEIE vs Foreign Tax Credit estimator
Wages or self-employment earned abroad — not passive/investment income.
Directional read
Foreign Tax Credit (Form 1116) likely helps more
Your implied foreign effective rate (~25%) is at or above your rough US bracket (24%). When you already pay as much or more tax abroad, the Foreign Tax Credit usually wipes out the US tax on that income — and any excess credit can carry forward up to 10 years.
- FTC keeps your income on the return, which can help with IRA contributions and the refundable Child Tax Credit (the FEIE can disqualify both).
- Excess foreign tax becomes a carryover you may use in other years.
- You generally can't double-dip: tax on income you exclude via FEIE can't also be credited.
Which route covers this?
Two questions this calculator did not ask decide the next step.
Both routes are modelled inside the return; which preparation covers it turns on two facts this comparison never asked. Nothing you answer leaves this page. Or skip them and map your whole US tax situation.
Rough educational estimate — not tax advice. This compares only your foreign effective rate against your bracket. It ignores the FEIE cap and stacking rule, the housing exclusion, carryovers, state tax, the Child Tax Credit, and self-employment tax. Passive and PFIC income are excluded entirely. The right answer for your situation needs a full calculation.
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The requested report is transactional. Educational follow-ups are sent only if you check the optional box.
Before you rely on this result
What would settle it, and what covers it
Documents or facts needed
- • Foreign income by type (wages, self-employment, pension, investment)
- • Foreign tax paid on each
- • Prior FEIE elections or revocations
Where this leads
Simple · $299 — models both routes inside the return.
Also possible: Complex ($799). The cheapest route that covers your facts is the right one; a package never covers more than one tax year.
How to read a status
- Likely:
- The facts entered meet the published test; confirm the inputs before acting.
- Possible:
- Some facts point this way and others are missing; more information decides it.
- Needs review:
- These inputs leave it open; a person should look before filing.
- Not currently indicated:
- Nothing entered triggers it this year; a changed fact can change the answer.
- Outside supported scope:
- This item is routed to a professional for preparation.
Scope. A comparison on the figures entered; a revoked exclusion cannot be re-elected for five years, which the comparison cannot see. This is a computation on the answers you gave, not individualized tax advice.
Tool: /tools/feie-vs-ftc
What changes the result
This answer changes if…
Whether the exclusion or the credit is the better route
- …your foreign income tax rate is above the U.S. rate on the same income — the foreign tax credit tends to leave no U.S. tax and carries excess credit forward; the exclusion cannot.
- …you were in the United States for more than 35 days in the twelve-month period — the physical-presence test for the exclusion is lost for that period.
- …the income is a pension, a distribution or investment income rather than earned income — the exclusion covers earned income only; the credit covers foreign tax on any category.
- …you claimed the exclusion in a prior year and now revoke it — a revocation locks the exclusion out for five years without IRS consent.
- …you have self-employment income — the exclusion does not reduce U.S. self-employment tax; a totalization certificate does.
Whether the 3.8% net investment income tax applies
- …your modified adjusted gross income is below the threshold for your filing status — the tax applies only to the lesser of net investment income and the excess over the threshold. Check it
- …you claim the foreign earned income exclusion — excluded wages are added back for the threshold test.
- …you rely on a treaty to credit foreign tax against this tax — the credit against the net investment income tax rests on a treaty article and on litigated positions, not on Form 1116.
- …a PFIC is under a QEF election — QEF inclusions enter net investment income only under a separate election (the 'section 1.1411-10(g)' election).
Each line names a fact that moves the result; what it moves to depends on the rest of your facts. Nothing here is a determination.
How Atamatax calculations are produced — the tests applied, statutory sources and review cadence — is documented in the methodology, and how the engine is validated in accuracy & review. Calculation fixes are recorded in the changelog.
Authorities cited
- IRC §911 — IRC §911 — Foreign earned income exclusion + housing exclusion/deduction
- IRC §901 — IRC §901 — Taxes of foreign countries and U.S. possessions
- IRC §904 — IRC §904 — Limitation on the foreign tax credit
- IRS Form 2555 — About Form 2555 — Foreign Earned Income (FEIE + housing)
- IRS Form 1116 — About Form 1116 — Foreign Tax Credit (Individual, Estate, or Trust)
Primary sources (Cornell Legal Information Institute for the US Code and CFR; IRS.gov for forms, procedures, and treaty documents). This page is general information, not individualized tax or legal advice.
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