Foreign Tax Credit for Individuals

​​U.S. citizens and residents working inside or outside the U.S. are generally required to file U.S. annual income tax returns reporting their worldwide income/deductions. If these individuals are also subject to income tax in a foreign country, there is a potential for double taxation (tax on the same income by two different countries). One method of mitigating double taxation issues is the foreign tax credit. The foreign income in question must be reported and subjected to taxation on the U.S. income tax return; however, a credit against U.S. income tax may be available based upon the amount of foreign income tax paid with respect to the applicable income. U.S. citizens and residents who qualify for this credit must elect to utilize it and calculate the applicable credit on Form 1116.