Foreign Tax Credit

A dollar-for-dollar reduction in U.S. income tax liability available to taxpayers who paid income tax to a foreign country, in order to avoid double taxation on foreign earnings.

For example, if a U.S. citizen residing in the UK paid $500 in British income taxes, they could claim a $500 credit on their U.S. return to offset taxes owed to the IRS on the same $500 of income.