How to include foreign income in tax return?

@pk12_2

@priyamehrotra ,  Namaste Priya ji  Agreeing with @DoninGA  for the Foreign earned income  recoignition, would like to add a few other items

(a) If you are an US person  citizen,, living and earning abroad,  AND  being taxed by both US ( home country ) and Foreign Taxing authority ( Host country / countries) with which US has a Tax treaty, you can mitigate the  effects of double taxation  by excluding a portion of your foreign earned  income ( including self-employment income ).  Taxes on any un-excluded  income is eligible for foreign tax credit or deduction.  This  ( the exclusion ) is done , as articulated by my colleague @DoninGA  by using form 2555.

(b) The form 2555 and the exclusion amount . ( ( which is adjusted each year based on US CPI ). requires you to pass  either Physical Presence Test --- present abroad  for a full 330 days  in any consecutive  12  month  test period ) OR Bona-fide Resident ( has to be approved by the IRS ).  There are many other "ands, ifs and buts" which TurboTax will walk you through.

(c)  The tax on any unexcluded income  ( active )  by a foreign taxing authority  and/ or passive income is eligible for credit ( form 1116 -- under  deductions and credits  tab  ) or deduction if you itemize.  Noite that the foreign tax credit is limited  essentially by a ratio of foreign  sourced income to world income.  Unallowed  foreign tax credit can be carried back one year or forward   as long as there is foreign source income --- it is generally an asymptotic affair 

(d) If the US person is a Green Card holder  or a dual citizen,  then there may be additional items to be aware of  and definitely a perusal of the tax treaty between US and that host country  is strongly suggested.

Does this cover sufficiently your situation  and/or do you need more help/info on this ?

Namaste ji

pk