Why would Credit Method be the best possible solution vs Exemption Method
A credit of $100 saves you $100.
An exemption of $100 saves you the tax you would pay on $100, which is less than $100.
Exemption Method states that the Residence tax authority exempts foreign source income…
If Tax on Res income is 50% & Tax on source income is 40% (assuming you made $1000 in gains) you would pay the source $400 & then get an exemption on the $400*50=200 and still have to pay your Residence income of $500-200 = $300 for a total of $700?
If the exemption is on foreign income, then you get an exemption of $1,000.
If the exemption is on foreign _ taxes paid _, then you get an exemption of $400.
Got it! My confusion was in where I thought The Credit and Exemption was for both Tax dollars owed.
In fact the Credit Method gives you a credit on the amount you paid in taxes and lowers your tax bill.
The exemption method exempts foreign source income.
Thank you.
My pleasure.