Foreign Tax Credit for Puerto Rico Taxpayers
U.S. citizens and residents compute their U.S. taxes based on their worldwide income. This sometimes results in U.S. citizens having to pay tax twice on the same income: once to the government of the foreign country where the income was sourced and once to the U.S. government.
The foreign tax credit was created to help taxpayers avoid this double taxation. It allows taxpayers to take a tax credit for taxes paid to a foreign government on foreign source income that is subject to U.S. tax. For Puerto Rico residents, the foreign tax credit reduces a taxpayer's tax liability by some or all of the Puerto Rico taxes paid or accrued during the tax year.
Refer to the Other Income lesson for more information on worldwide income.