In this case, the tax savings from the FEIE is constrained, due to the $95,100 limit on excludable foreign earned income (for 2012), yielding $20,066 in tax savings.
Because of the 30% limit, the FEIE only yields $1,815 in tax savings, whereas the FTC yields $8,100 in tax savings.
In contrast, because the tax savings from the FEIE is the tax on the foreign earned income by itself, the FEIE will tend to be inferior to the FTC to the extent that the taxpayer faces a progressive tax rate schedule.
Looking in isolation at Year 1, the FEIE would seem to be optimal.
In order to prevent "double dipping," no FTC is allowed for foreign taxes paid on income excluded under the FEIE and FHE regimes.
Since in many cases both the FTC and the FEIE and FHE are available, the two need to be considered together.
Low TAX JURISDICTION HIGH TAX JURISDICTION INCOME BELOW FEIE LIMIT 1.
Among these exceptions is the FEIE, a device that has been the target of dramatic modifications and considerable controversy since its introduction in 1926.
To be considered a "qualified individual" and thus eligible for the FEIE, a person must meet two conditions.
The FEIE has been a catalyst for significant controversy since its introduction nearly a century ago, with its opponents calling for major modifications to, or the outright elimination of, this tax program.
Postlewaite & Stern, supra note 120 (arguing for repeal of the FEIE on grounds that it violates tax equity without a countervailing economic purpose); John A.
at 747-48 (making the point in the context of the debate over the justification for the FEIE and FHE); see also David R.