Foreign Tax Credit Mismatch
Just because your home country has higher rates than the US in general doesn’t mean the foreign tax rates you actually pay on your foreign tax returns are higher. For example, some countries exempt certain capital gains or retirement income from tax, while you pay much higher taxes on your other sources of income. Usually, if you owe US taxes, it is because there is some kind of mismatch between the US tax system and your home country. If income isn’t taxed, you can’t claim a benefit on it. Our advice: If you accept tax benefits in your home country, you have to be prepared to accept a drawback on your US tax returns.
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