It's not a deduction, it's a credit so it effectively reduces the amount you pay in taxes to the US by the amount you paid to the foreign country.
Also, you do get an additional separate exemption/deduction (i.e. NOT a credit) up to around the first 100k of foreign earned income, if you meet some rather stringent qualifications.
There are ways to structure things using a foreign corporation to reduce your tax liability. This is changing though with the new 2017 Trump Tax "Cuts" and Jobs Act, which now requires expat business owners to report even their leftover business income as their own personal income (GILTI).
Many expat small business owners stand to be financially devastated because the law even taxes previous business income from the last 30 years in a so-called "transition tax." Ouch.
Also, you do get an additional separate exemption/deduction (i.e. NOT a credit) up to around the first 100k of foreign earned income, if you meet some rather stringent qualifications.
There are ways to structure things using a foreign corporation to reduce your tax liability. This is changing though with the new 2017 Trump Tax "Cuts" and Jobs Act, which now requires expat business owners to report even their leftover business income as their own personal income (GILTI).
Many expat small business owners stand to be financially devastated because the law even taxes previous business income from the last 30 years in a so-called "transition tax." Ouch.