Can I claim the Foreign Tax Credit if my employer pays my foreign taxes during an international assignment?
Yes, if the employer-paid foreign taxes are grossed up into your taxable compensation. The Foreign Tax Credit is available only for foreign taxes imposed on you. When an employer pays foreign tax on your behalf, and the tax equalization or gross-up arrangement treats it as additional compensation, those taxes are treated as yours for FTC purposes.
Common employer tax arrangements:
- Tax equalization: Employer pays all foreign and U.S. tax; you pay a hypothetical home-country tax
- Tax protection: Employer covers only the excess over what you would pay at home
- Laissez-faire: Employer does nothing; you pay foreign tax yourself
FTC treatment by arrangement:
| Arrangement | FTC available? |
| Tax equalization (grossed up) | Yes, on the gross-up income |
| Tax protection | Yes, on tax you bore |
| Laissez-faire | Yes, on tax you paid |
| Foreign tax paid by the employer, not grossed up | Generally, no; not imposed on you |
Gross-up mechanics:
- Foreign tax paid by employer: Added to your W-2 as imputed income
- Infinite iteration: Technically, grossing up itself triggers more tax, solved iteratively
- FTC base: The grossed-up amount is your foreign tax paid
Documentation needed:
- Assignment letter describing tax equalization or protection policy
- Hypothetical tax calculation from mobility tax provider
- Foreign tax return showing actual taxes paid
- W-2 with gross-up detail
For corporate expat FTC planning, see our Foreign Tax Credit Guide.
Last updated on April 29, 2026
