I am American, my husband German. For 2007 we lived in Germany and still live here. I had income from January-February from the U.S. and from March-December from Germany. My husband previously worked in the U.S. but not in 2007. For 2006 we filed jointly. We have joint bank (savings/checkings) in U.S.

My question: Can we file jointly for 2007? Or is my husband (who is German) not allowed to file since he did not earn income in the U.S. for 2007? Thus, do I need to file alone?

2nd question: Do we qualify for this Foreign Earned Income Exclusion (our salaries are not so high here in Germany!)

Thanks!

Yes, you can file a joint return or a separate return. It does not matter if your husband did not have any U.S. income.

You must meet at least one of the two tests to qualify for Foreign Earned Income exclusion:
Physical Presence Test. You were present in foreign country for full 330 days in any period of 12 months in a row. (That is these 12 months can include two tax years.)
Bona Fide Residence Test. Since you are citizen of the foreign country you meet this test, unless you were in the foreign country for definite temporary purpose.

If you are not able to use income exclusion, you can always file form 1116 to get foreign tax credit.
Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income (http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html)