@zhijiexia , I hope this is not a test question but an actual tax scenario. As I get the situation from your articulation:
1. Person A has US income of $157, 542 plus foreign excluded income of US$77,000 -- resulting a US tax liability of $27883.
2. Person B has US income of $157,542 plus an excluded foreign income of US$17,000 -- resulting in a US tax liability of $21, 837.
Therefore the question, why does the US tax amount change with the same un-excluded / US sourced income -- should it not be the same?
The answer lies in how the taxes are computed when there is foreign earned income exclusion. The tax is computed based on the total world income including the excluded income. Then the tax due to the excluded amount is subtracted in ratiometric manner ( excluded amount divided by total income multiplied by the total tax on the total income) -- the result being that even though the income is excluded, it does affect the tax computation by pushing you into a higher marginal bracket. Does this make sense ? TurboTax is computing correctly. If you are using downloaded version of the TurboTax there should be a worksheet showing the computation of the tax when foreign income is excluded.
Is there more I can do for you?
