Foreign Stock Tax Calculator

Quick summary

Owning foreign stocks as a US taxpayer means three layers of tax law collide: (1) US capital gains tax, (2) foreign withholding tax at the source country (often 10-30%), and (3) IRS reporting compliance (Forms 1116, 8621, 8938). This calculator handles all three.

It computes federal capital gains (LTCG 0/15/20% or short-term ordinary), NIIT 3.8% for high earners, state tax, and applies the Foreign Tax Credit (Form 1116) to offset US tax dollar-for-dollar with foreign taxes already paid. For PFIC (Passive Foreign Investment Company) holdings — which include most foreign mutual funds and ETFs — it applies the punitive §1291 regime taxing gain at the top 37% rate plus interest on deferred tax.

Use it before buying foreign equities. ADRs (Coca-Cola of London = Diageo PLC ADR on NYSE) get clean 1099-B reporting. Direct foreign brokerages trigger Form 8938 (FATCA) above $50K — and missing it = $10,000+ penalty per form.

Holding period

Filing status

Source country (for treaty rate / PFIC)

Sale proceeds (USD)

Cost basis (USD at purchase)

Sale commission

Foreign capital gains tax paid

Other ordinary income

State capital gains rate

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How to use

1 Enter sale proceeds and original cost basis in USD. Use exchange rate at the date of each transaction — IRS publishes annual averages.
2 Enter sale commission (deducts from proceeds) and choose holding period: short-term (≤1 year) or long-term (>1 year).
3 Choose the foreign country — ADR dividends and capital gains have specific tax-treaty withholding rates. UK 0%, Japan/China 10%, Canada/Australia/Switzerland/Germany/France 15%, Ireland 25%.
4 Select PFIC if your holding is a foreign mutual fund/ETF without QEF or mark-to-market election — punitive §1291 regime applies.
5 Enter foreign tax already paid (withheld at source). Click Calculate to see federal cap gains tax, NIIT, state tax, foreign tax credit, total US tax owed, and net after-tax.

Foreign Stock Holding Categories — How They're Taxed

Holding Type	US Tax	Reporting
ADR (American Depositary Receipt)	Same as US stocks (LTCG/STCG)	Form 1099-B from US broker
Direct foreign individual stock	Same as US stocks (LTCG/STCG)	Form 8949 + Form 8938 if total > $50K
Foreign mutual fund / ETF	PFIC §1291 (punitive 37% + interest)	Form 8621 EVERY YEAR
Foreign mutual fund with QEF election	Pass-through annually (often beneficial)	Form 8621 + QEF statement
Mark-to-market PFIC	Annual gain/loss at year-end FMV	Form 8621 mark-to-market

Tax Treaty Withholding Rates on Dividends (2026)

Country	Treaty Rate	Notes
United Kingdom	0%	Best treaty — no UK withholding on most dividends
Japan	10%	Reduced from statutory 20% via treaty
China	10%	Reduced from statutory 20%
Canada	15%	Reduced from statutory 25%
Switzerland	15%	Refundable amount above 15% via treaty
Australia	15%	Franking credits NOT recoverable for US tax
Germany	15%	Standard 26.375% — 11.375% refund process
France	15%	Form 5000 required for treaty rate
Ireland	25%	Often non-refundable due to Irish DWT structure
Non-treaty countries	30% statutory	Worst case — full 30% withheld, often non-creditable

Foreign Tax Credit (Form 1116) Rules

FTC offsets US tax dollar-for-dollar with foreign taxes already paid. Critical rules:

Rule	2026 Detail
Skip Form 1116 entirely	Foreign taxes ≤ $300 single / $600 MFJ AND only passive income (dividends, interest)
Categories	Passive (dividends, interest) and General (wages, business) — separate Form 1116 each
Carryover	1 year back, 10 years forward — track on Schedule B of Form 1116
FTC limit	Foreign tax × (US tax × foreign source income / total income)
Treaty re-sourcing	Some income re-sourced to maintain credit (Form 8833)

PFIC §1291 — The Punitive Default

Foreign mutual funds, ETFs, and many holding companies are PFICs. Without a QEF or mark-to-market election, the §1291 regime applies:

PFIC §1291 Treatment	What It Means
Excess distribution rule	Gain spread across all years held
Tax at top rate	Each year's portion taxed at top ordinary rate (37% in 2026)
Plus interest charge	Interest on deferred tax for each year
No LTCG benefit	Long-term gains lose 0/15/20% rates entirely
Form 8621 annual	$10,000 penalty per missed year per fund

FATCA Form 8938 Filing Threshold

Resident Status	End-of-Year Threshold	Any-Day Threshold
US Resident — Single	$50,000	$75,000
US Resident — MFJ	$100,000	$150,000
Living Abroad — Single	$200,000	$300,000
Living Abroad — MFJ	$400,000	$600,000

FAQ

Q How are foreign stocks taxed for US investors in 2026?

Same federal capital gains rules as US stocks: long-term (>1yr) at 0/15/20%, short-term at ordinary rates. Plus 3.8% NIIT for high earners. Foreign withholding tax on dividends offsets via Foreign Tax Credit (Form 1116). PFIC holdings get punitive §1291 regime — top 37% rate plus interest.

Q What is a PFIC and why is it punished?

Passive Foreign Investment Company — any foreign corporation where 75%+ of income or 50%+ of assets is passive. Includes most foreign mutual funds and ETFs. Without QEF or mark-to-market election, gains are taxed at the TOP 37% rate each year held, plus interest on deferred tax — designed to discourage US investors from foreign funds.

Q When do I need to file Form 8938 (FATCA)?

When aggregate value of foreign financial assets exceeds $50,000 end-of-year OR $75,000 any time during year (single, US resident). MFJ thresholds double. Living abroad: thresholds 4× higher. Penalties for missing Form 8938: $10,000 to $50,000+ per year per failure.

Q How do I claim the Foreign Tax Credit?

Form 1116 — separate forms for passive (dividends/interest) and general (wages/business) income. Skip Form 1116 if total foreign tax is ≤ $300 single / $600 MFJ AND it's all passive income — claim directly on Schedule 3, line 1. Carryback 1 year, carryforward 10 years.

Q What is the difference between ADR and direct foreign stock?

ADR (American Depositary Receipt) — foreign company shares packaged for US trading. Issued by US bank, trades on NYSE/Nasdaq, denominated in USD, reported on Form 1099-B by US broker. Direct foreign stock — bought through a foreign brokerage in local currency. Same federal taxation, but triggers Form 8938 reporting and currency conversion complexity.

Q Which countries have the best tax treaty for US investors?

United Kingdom (0% dividend withholding). Japan and China (10%). Canada, Australia, Switzerland, Germany, France (15%). Ireland is the worst major market (25% non-refundable). Non-treaty countries default to 30% statutory withholding. Use the calculator's country selector for your specific holding.

Q Are international ETFs subject to PFIC rules?

NO if the ETF is US-domiciled (e.g., Vanguard VXUS, iShares EFA) — even though they hold foreign stocks, the ETF itself is a US company. AVOID buying foreign-domiciled ETFs (like London-listed iShares IEMG) directly through a foreign brokerage — these ARE PFICs and trigger §1291 punishment.

Q Should I sell foreign stocks at a loss for tax planning?

Yes — works the same as US stocks. Net capital loss reduces other gains; up to $3,000/year offsets ordinary income; remainder carries forward indefinitely. Watch the wash-sale rule §1091 — buying substantially identical security within 30 days disallows the loss (applies to ADRs and direct foreign stock, but NOT crypto in 2026).