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    msfantastic's Avatar
    msfantastic Posts: 13, Reputation: 1
    New Member

    Oct 30, 2008, 04:22 PM
    Foreign Income Exclusion
    I am using Turbo Tax for tax planning.
    I wanted to see how the foreign income is treated, so I put the following scenario:

    Ordinary US income of $10,000 and foreign income of $4,000

    I see that Turbo Tax calculates AGI as $6,000. I thought "foreign income exclusion" means that you don't pay US taxes on the foreign income. I did not expect that it will reduces the US income by the foreign income amount.

    Is AGI becoming $6,000 correct?
    MukatA's Avatar
    MukatA Posts: 7,110, Reputation: 176
    Tax Expert

    Oct 31, 2008, 05:58 AM

    It appears that you reported $10,000 as income and then selected that out of $10,000, $4000 is foreign earned income.

    Report $10000 as income. Report $4000 as income from foreign sources.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert

    Oct 31, 2008, 09:52 AM
    If you are a resident alien, the source of the income is irrelevent. U.S. citizens and resident aliens pay taxes on ALL world-wide income. Your AGI will be $14,000.

    If you are a non-resident alien, then report ONLY the $10,000.

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