| A deduction is allowed for foreign income taxes paid or accrued during the taxable year. Alternatively, both individual taxpayers and corporations may claim a Foreign Tax Credit on income earned and subject to tax in a foreign country or U.S. possession. One may not claim both the deduction and the credit. |
| The Foreign Tax Credit limit is the proportion of the taxpayer’s tentative income tax (before the Foreign Tax Credit) that the taxpayer’s foreign source taxable income bears to his or her worldwide taxable income for the year. Foreign Tax Credit is applied against gross tax liability before all other credits. It is not creditable against accumulated earnings tax and personal holding companies tax |
| The limit must be applied separately to nonbusiness interest income (passive income), foreign branch income, global intangible low taxed income (GILTI) and general income |
| The Foreign Income Tax Credit is equal to the lesser of the actual foreign tax paid or the Foreign Tax Credit limit. However, the FTC for the GILTI basket is limited to 80% of the GILTI Inclusion |
| The unused foreign tax credit may be carried back 1 preceding year and then forward to the following 10 taxable years |
