It depends. I researched this link that lists specific requirements on who can claim the foreign income exclusion. Here are the requirements.
- A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
- A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
Now, it is mentioned in my earlier post that to file option 1, your wife MAY BE CONSIDERED a resident alien to exclude the foreign income but technically she isn't until the W7 application is complete. With this said, it is my opinion that she should not a candidate for Foreign income Exclusion until she is legally a resident alien. This is a matter that is interpreted as a legal opinion and not a tax question and we can't specifically comment on legal matters, we can caution our Taxpayers on legal ramifications that may exist. Now the good news.
You may qualify for a foreign tax credit. I have researched this Irs link. After reading this, the rules seem less strict.
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