Form 2555 can be downloaded from the IRS website and must be filed together with Form 1040.

The Foreign Earned Income Exclusion allows qualifying Americans abroad to exclude a portion of foreign earned income from U.S. taxation.

You must have foreign earned income, maintain a tax home abroad, and meet either the Physical Presence Test or the Bona Fide Residence Test.

In some cases both mechanisms may be used together depending on the type of income and the foreign taxes paid.

IRS Form 1116 can be downloaded directly from the IRS website. The form must be filed together with your U.S. tax return (IRS Form 1040). The IRS also publishes official instructions that explain how to complete the form and calculate the Foreign Tax Credit.

Form 1116 is used to claim the Foreign Tax Credit. The credit reduces U.S. income tax on foreign-source income by the amount of qualifying foreign income tax paid or accrued. Its purpose is to prevent double taxation when income is taxed both abroad and in the United States.

Form 1116 reports foreign-source income that falls into specific categories, such as general income (e.g., salary or business income) and passive income (e.g., dividends or interest). The income must be separated by category, and each category is calculated independently for purposes of the Foreign Tax Credit limitation.

In certain cases, income may be treated as foreign-source under a tax treaty, even if it would otherwise be considered U.S.-source income. These “resourcing rules” can affect the Foreign Tax Credit calculation. Proper classification is important when applying treaty provisions alongside Form 1116.

The concept of the Foreign Tax Credit is straightforward, but the calculation can be technical. Taxpayers must apply the limitation formula correctly, categorize income properly, and track any unused credits carried forward from prior years.

You may not need to file Form 1116 if your total foreign taxes paid are below certain thresholds (generally $300 for single filers or $600 for married filing jointly), all your foreign income is passive income reported on a payee statement, and you are not carrying forward unused credits. In these limited cases, a simplified election may apply. However, many Americans abroad do not meet all these conditions and must file Form 1116 to properly claim the Foreign Tax Credit.