Foreign Tax Credit

The Foreign Tax Credit is a tax benefit for U.S. citizens or residents who earn income abroad and pay taxes to another country. It allows them to reduce their U.S. tax liability by the amount they paid in foreign taxes. This helps prevent double taxation, meaning you won't be taxed twice on the same income. Instead of losing money to taxes in two countries, the credit gives you relief, ensuring that the total tax burden is fairer and manageable. It encourages U.S. taxpayers to invest and earn income globally without facing excessive tax penalties.