I’m interested in trying a new tax method this year. Instead of the foreign earned income exclusion, I’ll do the foreign tax credit. Here are two reasons it looks like this will be better.
1. Able to fund a Roth IRA
2. Get the child tax credit
I’ve always done my taxes myself, but this year turbo tax isn’t letting me file for free so I’m trying Tax Slayer. It’s not intuitive to me to do the foreign tax credit.
It seems you cannot switch back and forth between the foreign earned income exclusion and the foreign tax credit. I’m not sure if I’m making the right choice. My income was very low last year (under 1million yen). Has anyone ever done their taxes this way while living in Japan? How did it go?
2 comments
The Japanfinance subreddit is probably better for you on this, someone made a spreadsheet that shows at what income levels this makes sense to do. Maybe a search would pull it up?
In my case, it doesn’t make sense because, while I would get the child tax credit and other benefits, it would mean that my AGI (adjusted gross income) would be much higher, so I’d have huge student loan payments come due. With the FEIE my AGI is $0 so my minimum monthly payment under income-based repayment is… $0.
Maybe r/JapanFinance is a better sub for this. Roth IRA is nice to have, but I’m using a brokerage account instead.