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Foreign earned income increases tax due even after exclusion!
I am a US citizen living abroad. Income items on my tax return are foreign earned income, capital gains, and income from K-1 statement. All the foreign income qualifies for exclusion under the rules.
I entered all my data into Turbo Tax except for the foreign earned income. Without foreign income, the tax liability was around 7K. Then I entered the foreign earned income (in the Less Common Situations section) and answered all the related questions. Adjusted gross income and taxable income remained the same as before (as they should), but the tax liability increased to 14K! I have gone through the forms in Forms mode several times but I cannot see why this is happening and it makes no sense. Any guidance is much appreciated.
‎April 15, 2023
2:53 PM