Foreign Tax Credit & Foreign Income Exclusion

I didn't check the math or the current FEIE amount, but I have two comments.

1. The FTC is not taken on any FEIE. So only foreign tax allocable to the foreign earned incomenot qualifying for exclusion is allowed.
2. Use form 2555 to help figure income tax. Your method is the old method that existed up until about three years ago where foreign earned income was stacked on top of other income, so the foreign earned income that was excluded was the highest taxed income.

Now the new method, which also indexed the FEIE amount, stacks foreign earned income beneath other income. That means the exclusion applies to low-taxed income, and the IRA distribution is taxed at the highest rate before the low rate FEI is excluded.

In addition to Art's points (BTW the instructions for reducing the foreign tax because of the foreign earned income credit is in line 12 of form 1116), the AMT tax seems kind of high. Did you calculate the AMT foreign tax credit (line 32) correctly or even at all?

The best way to reduce the tax bill is to try to not take the early distribution or use one of the "loopholes" to eliminate the penalty. These are to take enough money from your IRA each year till age max(59.5, currentAge+5), first time home purchase up to 10k, qualified education expenses, qualified medical expenses, etc. This advice applies even to people living in the US. See

I have not verified your math but:

1 - You can't take FTC on income which has been excluded through FEIE. 2 - As there are children, it is possible that FEIE is to your client's benefit. Check out FTC by itself. (Though the IRA Early Distribution may have done your client in for the claim for CTC.)