The tax savings of a credit is greater than the tax savings from a deduction. The foreign tax credit is, plainly, a credit—not a deduction. A credit is a dollar-for-dollar reduction of one’s U.S. income tax. In the context of international taxation, it is a dollar-for-dollar reduction of one’s U.S. income tax by the amount of foreign income tax paid. By contrast, a deduction lowers the amount of your net taxable income. The tax saving from a deduction is the amount of tax that the taxpayer would otherwise have had to pay on the amount that was deducted.
Difference between a foreign tax credit and a deduction was last modified: March 18th, 2016 by Tax