When a U.S. person is in an excess credit position, the non-creditable foreign income taxes increase...

Question

When a U.S. person is in an excess credit position, the non-creditable foreign income taxes increase the total tax burden on foreign-source income beyond what it would have been if only the United States had taxed that income.

Identify two strategies for reducing excess credits.

Robert · Accepted Answer

Strategies for reducing excess credit 
For a U.S. person who has excess credit positions, foreign taxes increase his total tax cost by the amount of this 
excess credit. Therefore, every dollar of this foreign income tax which he saves helps his reduce the total tax cost 
upto the excess credits amount. 
Two strategies for reducing excess credit are: 
1. Foreign Tax Planning:  
As reduction in the foreign tax will help save the total tax cost, foreign tax planning is important. Some 
techniques that a U.S. person can use to reduce foreign income taxes:

When a U.S. person is in an excess credit position, the non-creditable foreign income taxes increase the total tax burden on foreign-source income beyond what it would have been if only the United...

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