Working Overseas? Here's Whether You Owe the IRS Twice
If you take a job abroad, the country you work in usually withholds tax first. But if you're still a US citizen or green card holder, you're required to report worldwide income to the IRS too — which raises the fear of paying tax twice on the same paycheck. Two tools prevent that. The Foreign Earned Income Exclusion (FEIE) lets you exclude up to $130,000 of foreign wages in 2025 from US taxable income. The Foreign Tax Credit then offsets US tax on whatever income remains with the tax you already paid overseas, so you typically only owe the IRS the difference — if anything at all.
How It's Calculated
| Step | Item | Detail |
|---|---|---|
| 1 | FEIE Exclusion | Up to $130,000 of foreign earned income (2025) |
| 2 | Remaining Taxable Income | Foreign income − exclusion − other deductions |
| 3 | US Tax Before Credit | 2025 federal brackets, single filer (10%–37%) |
| 4 | Additional Tax | US tax − prorated Foreign Tax Credit (floor $0) |
Tax treaties set different taxing rights and withholding caps by country, and whether you pass the physical presence or bona fide residence test changes what you can claim. This tool is a simplified estimate for rough planning, so if the numbers are large or you have dual-residency questions, confirm the exact filing amount with a tax professional using Form 2555 and Form 1116.
Frequently Asked Questions
You must report worldwide income, but the FEIE and Foreign Tax Credit together usually erase most or all of the extra US tax on that income.
A yearly exclusion (up to $130,000 in 2025) for foreign wages if you meet the physical presence or bona fide residence test. It doesn't reduce foreign tax paid.
This is a planning estimate only. Actual filing uses Form 2555/1116 and depends on residency tests and treaty terms — check with a tax professional for large amounts.
※ Estimate based on 2025 federal single-filer brackets and the FEIE limit; treaty-specific provisions are not reflected.