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The short answer
Nigerian withholding tax deducted from your fees can be claimed on Form 1116 as a foreign tax credit, or deducted on Schedule A, but the credit only offsets US tax on foreign-source income. The Form 1116 instructions list pay for services performed outside the US as foreign-source income, so fees for work you did while in the US may give little or no credit. Keep the WHT receipt and convert the tax at the rate on the day it was paid.
The basic rule
The IRS foreign tax credit lets US taxpayers who paid or accrued foreign income taxes, and are subject to US tax on the same income, take a credit on Form 1116 or an itemised deduction on Schedule A. Generally only income taxes, war profits and excess profits taxes, or taxes in lieu of them, qualify (IRS, reviewed July 2026). A withholding tax deducted from your gross fees is the kind of tax that is normally analysed under the "in lieu of" heading.
There is no US-Nigeria income tax treaty, so the credit works under US domestic rules only, and no treaty provision re-sources income or sets a reduced Nigerian rate.
The limit that decides most cases
Publication 514 says the foreign tax credit can only reduce US tax on foreign-source income. The IRS limit is your US tax multiplied by your foreign-source taxable income over your total taxable income. Freelance fees are compensation for personal services, and the Form 1116 instructions list "compensation for services performed outside the United States" as foreign-source income. Work you did at your desk in Atlanta for a Lagos client does not fit that description, even though the client is Nigerian.
| Where you did the work | Likely source | Effect on the credit |
|---|---|---|
| In the US | Not foreign-source under the services rule | Limit may be close to zero for that income; credit may be little or none |
| In Nigeria (for example, a two-month stay working on site) | Foreign-source | Credit available up to the limit |
| Partly in each | Split under the source rules for mixed services | Credit for the foreign-source share |
This is why many US-based freelancers find the Nigerian deduction becomes a cost rather than a credit. Unused credit can be carried back one year and forward ten (IRS), so a credit you cannot use now may help in a later year when you have foreign-source income, for example from working on site in Nigeria.
Is the tax creditable at all?
Publication 514 notes that only the legal and actual foreign tax liability counts, and not amounts reasonably certain to be refunded. It also refers to Notice 2023-55, which gave temporary relief from the newer test for whether a foreign tax counts as an income tax. A preparer will check whether the Nigerian deduction meets the test that applies for your year.
How to claim
- Report the gross fee on Schedule C, not the net amount received.
- Convert the Nigerian tax to dollars at the rate on the day it was paid; the Form 1116 instructions use the rate in effect on the date you paid the foreign tax.
- Complete Form 1116 for the general category of income (business income generally falls there).
- Decide credit or deduction for the year: Publication 514 says if you credit any qualified foreign tax in a year, you must credit all of them, and the same applies to deducting.
- Keep the WHT receipt with the client's tax ID, gross amount and tax deducted, plus your bank record of the net payment.
Worked example (illustrative figures)
You invoice a Nigerian client $10,000 and receive $9,000 after 10% WHT. All the work was done in the US. Schedule C shows $10,000. Because the income is not foreign-source under the services rule, your Form 1116 limit for it may be nil, so the $1,000 may give no credit this year; it may be carried back or forward. Had you done the work during a stay in Lagos, the $10,000 would be foreign-source and the $1,000 could reduce your US income tax, up to the limit. Your preparer will apply the exact sourcing rules.
Keeping a carryover file
Because unused credits can move back one year and forward ten, the paperwork has a long life. Keep a running schedule by year: Nigerian tax paid, credit used, credit carried. Store each WHT receipt with the invoice it relates to and the bank record of the net payment. If you later spend months working in Nigeria, or receive Nigerian rent or interest, the old credits may suddenly be usable, and a preparer can only claim them if the trail is complete.
What it does not do
- It does not reduce self-employment tax; see SE tax on Nigerian client income.
- It does not let you leave the gross fee off your return.
- Deducting the tax on Schedule A only helps if you itemise.
For Nigerian tax on other income, such as rent, see foreign tax credit for tax paid in Nigeria. This is information, not tax advice.
Where Pryme fits
Pryme invoicing records gross fee and WHT on separate lines, and a verifiable statement backs up the net payment received, which is the paper trail Form 1116 relies on.
Questions people ask
Can I claim Nigerian withholding tax on my US return?
Possibly, on Form 1116 or as an itemised deduction, but the credit only offsets US tax on foreign-source income, and fees for work done in the US may not be foreign-source.
Why is my foreign tax credit zero for Nigerian WHT?
Often because the work was performed in the US, so the income is not foreign-source and the Form 1116 limit for it is nil. Unused credit can be carried back one year or forward ten.
What exchange rate do I use for foreign tax paid?
The Form 1116 instructions use the rate in effect on the date you paid the foreign tax.
Does the foreign tax credit reduce self-employment tax?
No. It is a credit against US income tax.
Sources
- IRS: Foreign tax credit (reviewed 9 Jul 2026) · accessed Oct 2026
- IRS: Foreign tax credit, how to figure the credit (reviewed 9 Jul 2026) · accessed Oct 2026
- IRS Publication 514 (2025), Foreign Tax Credit for Individuals · accessed Oct 2026
- IRS: Instructions for Form 1116 · accessed Oct 2026
- IRS: United States income tax treaties, A to Z (reviewed 3 Jan 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.