# Figuring out hypothetical US tax on foreign income (FTC)



## Alltimegreat1 (Feb 25, 2015)

When claiming the FTC, one must show that the taxes paid on foreign earned income are equal to or higher than the taxes that would have been owed in the US on that income. Is there a website out there for the FTC showing the tax amounts for various US incomes?


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## BBCWatcher (Dec 28, 2012)

No, that's not correct. You can and should claim the FTC for any level of foreign income tax, even one dollar.

Singapore has a lower rate of personal income tax than the U.S. I still use the FTC, of course. I also use the FEIE/FHE (a choice, a good one in Singapore), but the FTC is not applied to that portion of income covered by the FEIE/FHE.


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## BBCWatcher (Dec 28, 2012)

I think what you're asking is what are U.S. income tax rates on _any_ type of taxable income? You can just look at the tax brackets to get a sense of that, bearing in mind those are the tax rates on what's left over to tax.

....But you'll never figure that out manually, at least not without a LOT of work reinventing the wheel (and with a high chance of error). That's what tax preparation software is for, as we've recommended. You input all your information (or hypothetical information) into the software, then you can go back and try "what if?" scenarios. For example, what if you didn't take the FEIE/FHE and instead took the FTC on all income, not just on the non-FEIE/FHE part of your income? What happens if I file jointly instead of separately?

In other words, the U.S. tax brackets/rates, compared to German rates, give you a _clue_ that the simulation(s) is(are) worth running. They don't tell you the answer(s). The simulations do that.

Let the tax prep software do what it's good at.

Then there's my case, to pick another example. Singapore's income tax rates are unambiguously lower, so there's just no question I'm going to be taking the FEIE/FHE here. No need even to run a simulation for that.


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## Alltimegreat1 (Feb 25, 2015)

OK, that makes sense. Thanks for clarifying. I'm wondering about how to officially calculate the foreign earned taxes paid. The German version of the W2 (Steuerbescheid) states the income taxes withheld, however I usually have a considerable backpayment due to the tax classes my wife and I are in. This means that I actually pay more taxes on earned income in Germany than stated on the W2. Would the IRS only care about the W2 if I was audited?


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## Bevdeforges (Nov 16, 2007)

First of all, the IRS will never see your Steuerkarte, so you're kind of on the honor system here. (Though theoretically, if they thought something "looked funny" they could request information from the Steueramt directly.)

Secondly, the US tax system is pretty much cash-basis. So, what you could do - for 2014 anyhow - is to use the amount of income tax you had withheld on your 2014 income, combined with what you had to pay in 2014 on your 2013 income as your German "taxes paid" in 2014. Each year going forward, you'd use your current year's withholding plus the actual payment you made for the prior year.
Cheers,
Bev


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## FFMralph (Dec 22, 2012)

The IRS doesn't care what is on your Lohnsteuerbecheid. They are only concerned about what you actually paid. Which means after any refunds or additional payments determined by your German tax return. If you do a joint German return with a NRA spouse who also paid German taxes, remember to prorate her taxes out of the total foreign taxes. If you combine the FEIE with the FTC you also have to prorate these amounts out of the taxes. Since all of our German income tax is combined, you also have to prorate between passive and general income to determine how much tax was paid for each type of income. It gets real ugly.


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