FOREIGN INCOME OPTIONS FOR U.S. TAXATION
01.Core Concepts
PURPOSES Deduction for Foreign Taxes Paid (for tax years before 2018 and after 2025*) Tax Credit for Foreign Taxes Paid Foreign Earned Income Exclusions Options Taxpayer’s foreign taxes paid may be deducted as an itemized deduction on Schedule A to reduce adjusted gross income in calculating taxable income. Taxpayer can claim a credit for some, or all of the taxes paid to the foreign country, including taxes on foreign earned income that exceeds the amount ($132,900 for 2026) of foreign earned income exclusions taken. Taxpayer can exclude up to $132,900 for 2026 of foreign earned income from gross income. Benefit *TCJA 2017 suspended deductibility of foreign property taxes as itemized deductions for tax years 2018 – 2025. OBBBA permanently repeals the itemized deduction for foreign property taxes. 7