You must have some other income that is not excluded. When you take the foreign earned income exclusion, the amount of excluded foreign income affects the tax on your other non-excluded income, even though you do not pay tax on the excluded foreign income itself. This happens because your other income, that is not excluded, is taxed at the same rates that would have applied to that income if you did not get the exclusion. The non-excluded income is "stacked" on top of the excluded income for the purpose of calculating the tax. Therefore, when the amount of excluded foreign income increases, some of the other income gets pushed up into a higher tax bracket, and is taxed at a higher percentage. This is the way the tax law requires the foreign earned income exclusion to be calculated. TurboTax is doing the calculation correctly.
