Dependent Care Credit and Foreign Earned Income Exclusion

[Howco]

US taxpayer working in Canada. Qualifies to exclude some foreign earned income on Form 2555. Taxpayer also incurs dependent care expenses while in Canada.

Does taxpayer have to reduce dependent care expenses eligible for the credit by the fraction of excluded foreign income over total foreign income?

[Roland Slugg]

No, and this can result in a positive result for the taxpayer, but in most cases it won't make any difference.

If the FEIE reduces the taxpayer's AGI by enough, it might have the effect of increasing the dependent care credit percentage above the 20% minimum.

When completing F-2441, see the instructions for the entry to be made on line 1, column (c) if the dependent care was performed in Canada.