FTC more favorable than FEIE (for us)

It seems that taking the FTC is more favorable (less taxes) for us than taking the FEIE. After what I've read on this board, that was unexpected. I did both scenarios by hand, and with tax software, to make sure.

(FYI, we are US citizens, resident in the UK since late Aug 2009, filing a US tax return).

Has anyone else found the FTC to be more favorable than the FEIE?

Form 1116 was difficult to fill out--and I had to do most of it by hand, even when using the software--so I'm still wondering if I did something wrong...

If anyone knows any particular mistakes to watch out for (that would result in the FTC being more favorable), please let me know. Thanks!

It would depend on your sources of income.

sweetpeach, our sources of income are almost entirely wages (line 7 of 1040). Does that seem to fit with the FTC being more favorable?

It isn't unusual for FTC to be better or equal to FEIE.  Myself, I only claim FTCs.  But no one is going to be able to tell you if you did the FTC form correctly without reviewing it.

Of course, Sara, I understand that. I'm glad to hear that it's not unusual for the FTC to be better (I was afraid it was very uncommon).

One concern I had about the FTC was line 3e, gross income from all sources. When I did this by hand, I used my "total income" figure from Form 1040, line 22. The software, on the other hand, used a slightly higher figure--the difference being my "total expenses" from Schedule C-EZ, line 2.

Does that sound like a software error? (In any case, the amount isn't very significant, and only adds $8 to my foreign tax credit.) I just don't want the IRS to freak out that the numbers (gross income on the 1116, and total income from line 22) don't match.

My other big question on 1116 (which I can't seem to find the answer to) is whether or not my IRA deduction (taken on Form 1040, line 32) should be included on Form 1116, line 3b ("other deductions").

(Interestingly, taking the FTC results in us having to pay AMT--yet the tax is *still* less than with the FEIE.)

The FTC answer will also be different depending on what US income or gains are being treaty resourced on your UK Return.

How you are reporting the IRA deduction in the UK may also affect the total creditable foreign taxes.