Enter your income and foreign taxes paid to see a side-by-side comparison of your U.S. tax liability under each strategy. Uses real IRS tax brackets.
Fill in your details below. The calculator uses real 2024 and 2025 U.S. tax brackets to estimate your liability under each strategy.
U.S. expats have two main strategies to avoid double taxation on foreign income: the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). They work very differently, and choosing the wrong one can cost you thousands of dollars per year.
The FEIE lets you exclude up to $130,000 (2025) of foreign earned income from your U.S. taxable income. That income simply doesn't appear on your U.S. return. This is powerful when your foreign tax rate is low — you get a big exclusion without needing to have paid foreign tax to offset it.
The FTC gives you a dollar-for-dollar credit against your U.S. tax liability for income taxes you paid to a foreign government. You include all income on your U.S. return, calculate U.S. tax normally, then subtract what you paid abroad (subject to a per-category limit). This works best in high-tax countries where foreign taxes fully cover or exceed your U.S. liability.
| Factor | FEIE | Foreign Tax Credit |
|---|---|---|
| Best for | Low- or zero-tax countries | High-tax countries (e.g., UK, Germany) |
| How it works | Excludes income from U.S. return | Credits foreign taxes paid against U.S. tax |
| 2025 limit | $130,000 per person | Limited to U.S. tax on foreign income |
| Form required | Form 2555 | Form 1116 |
| Effect on IRA contributions | Reduces eligible earned income (may limit IRA contributions) | No effect on earned income definition |
| Self-employment tax | Does not reduce SE tax | Does not reduce SE tax |
| Carryforward | No carryforward | Excess credits carry forward 10 years |
| Revocation penalty | 5-year wait to re-elect if revoked | No election restriction |
One non-obvious downside of the FEIE is the stacking rule. When you exclude income using the FEIE, your remaining income is still taxed — but it's taxed as if you had no exclusion. That means your remaining income gets pushed into higher tax brackets than it would be otherwise.
For example: If you have $160,000 of foreign income and use the FEIE to exclude $130,000, the remaining $30,000 is taxed at the rates that would have applied if $130,000 were at the bottom of your bracket — not at the lowest marginal rates.