Are Foreign Dividends Taxed Twice?
When you own a foreign stock, its home country typically withholds tax on the dividend before it reaches your account, and the US taxes the same dividend again as part of your income. Left alone, that's double taxation on the same dollar — which is exactly what the Foreign Tax Credit (FTC) exists to prevent. Claimed on Form 1116, it lets you offset the foreign tax you've already paid against your US tax liability on that same income. This calculator estimates your total tax burden and effective rate after the credit is applied.
How the Math Works
The calculator computes the foreign withholding tax and your gross US tax liability on the dividend separately, then applies the smaller of the two as your Foreign Tax Credit. Any remaining US liability beyond what the credit covers is added on top of the foreign withholding to get your total tax burden. If the foreign rate exceeds your US rate, the excess above your US liability generally isn't recoverable and adds to your effective tax rate.
Dividends from many developed markets carry withholding rates in the 15% range under US tax treaties, which is close to typical US qualified dividend rates and adds little extra burden. Markets with higher withholding — some Asian and European countries can run 25-30% — leave a real, unrecoverable gap, so it's worth checking a country's treaty withholding rate before assuming foreign dividend income comes out tax-neutral versus a domestic dividend.
Frequently Asked Questions
It offsets foreign tax already paid against your US tax on the same income, capped at your US liability on that income, claimed via Form 1116.
No, the credit is capped at your US liability. You owe no extra US tax, but the excess foreign withholding generally isn't refunded.
※ Excludes FTC limitation category rules and other filing details; this is an estimate for reference only.