Who Can Take the Credit?

U.S. citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U.S. tax on foreign source income may be able to take a foreign tax credit.

Excluded income. You cannot take a credit for foreign income taxes you pay or accrue on income that you exclude from gross income under the foreign earned income or foreign housing exclusion. See Taxes on Excluded Income, later, under Reduction in Total Foreign Taxes Available for Credit. These exclusions are discussed in detail in Publication 54.

U.S. Citizens

If you are a U.S. citizen, you are taxed by the United States on your worldwide income wherever you live. You are normally entitled to take a credit for foreign taxes you pay or accrue.

Citizen of U.S. possession. If you are a citizen of a U.S. possession (except Puerto Rico), not otherwise a citizen of the United States, and not a resident of the United States, you cannot take a foreign tax credit.

Resident of American Samoa. If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, Guam, or the Northern Mariana Islands, you cannot take a credit for the taxes you pay or accrue on the excluded income. For more information on this exclusion, see Publication 570.

Resident Aliens

If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U.S. citizens. If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules.

Usually, you can take a credit only for those foreign taxes imposed on your foreign source income. You must have actually or constructively received the income while you had resident alien status.

For information on alien status, see Publication 519.

Nonresident Aliens

As a nonresident alien, you can claim a credit for taxes paid or accrued to a foreign country or possession of the United States only on foreign source or possession source income that is effectively connected with a trade or business in the United States. For information on alien status and effectively connected income, see Publication 519.

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