FEIE vs FTC: Which saves you more?
Compare the two main methods US expats use to avoid double taxation — and see which one works better at your income level.
Two ways to avoid being taxed twice
If you're a US citizen living in Australia, you must file a US tax return every year — even though you're also paying Australian tax. The IRS gives you two tools to avoid paying tax on the same income twice:
FEIE (Foreign Earned Income Exclusion) lets you exclude up to $132,900 of your Australian employment income from US tax entirely (2026 figure). Income below that threshold is simply not counted in your US return. Simple and clean — but if your income is above the threshold, the excess is still taxed by the IRS, and you lose some other benefits like IRA contributions.
FTC (Foreign Tax Credit) takes a different approach: you declare your full income to the IRS, calculate what you'd owe, and then subtract a credit for tax you already paid to the ATO. The credit reduces your US bill dollar-for-dollar. If you've already paid more tax in Australia than you'd owe in the US (which is common, since Australian tax rates are generally higher), your US tax bill becomes zero — and you may have leftover credits to carry forward.
For most Australians, FTC wins. Because Australian income tax rates are higher than US rates at most income levels, you'll often find you've already paid more to the ATO than the IRS would charge. That means FTC eliminates your US liability entirely. FEIE can win for lower incomes (below the $132,900 threshold) or in specific situations — which is exactly what this calculator helps you explore.
Your numbers
Your gross salary or self-employment income earned in Australia this year.
Income from US sources only — US rental income, US freelance work, US dividends etc. Most Australian-based earners enter 0.
We've estimated this from your income. You can adjust if you know your actual figure. Excludes Medicare levy and offsets.
Using fallback rate
Calculations use ATO 2025–26 resident income tax brackets and US 2026 federal tax brackets (single filer). Estimates only — does not include state taxes, offsets, surcharges, or deductions beyond the standard deduction.
FEIE
Foreign Earned Income Exclusion
FTC
Foreign Tax Credit
(+US$9,074 carry-forward)
The verdict
These two methods produce very similar results at your income level. The right choice depends on your full situation — consider factors like IRA contribution eligibility and future income changes.
When the result might be different for you
- Your income is below $132,900 USD — FEIE may eliminate all US tax without needing to calculate credits
- You want to contribute to a Roth IRA — FEIE-excluded income cannot be used as the basis for IRA contributions
- You have self-employment income — FEIE does not reduce self-employment tax; FTC may produce a better overall outcome
- You claim the FEIE now and want to switch to FTC later — once you revoke FEIE, you cannot reclaim it for 5 years without IRS approval
- Your AUD income is partially from non-employment sources (investments, rent) — FEIE applies to earned income only; FTC is broader
This tool uses simplified tax rates and doesn't account for deductions, offsets, state taxes, or your specific filing status. Use it to build intuition about how FEIE and FTC work — not to make filing decisions. Always consult a qualified cross-border tax specialist before choosing a method.
Want to see how this fits your full picture?
FEIE vs FTC is just one piece. The GlobalTaxMate assessment looks at your complete situation — retirement accounts, Medicare levy, investments, and more.
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