I am planning to file married filing jointly. We married last year in Oct 2021, and my wife is a resident of Canada. She does not work in the USA nor has ever been to the USA. It's recommended we file married filing jointly for the USA Tax return, due to immigration reasons. I make about $150,000 a year, she makes about $48,000 USD equivalent. Is her income excludable per the IRS tax treaty? She is a Canadian PR and an Indian Citizen.
She has never been in the USA, her tax home is Canada, so per Form 2555 she should meet the requirement to be able to exclude her income? I am saying it will be added, but will also be excluded, so the net effect on our tax return would be 0. She does of course pay Canadian Income tax. Seems two options, to exclude her income using Form 2555 or to take foreign tax credit using form 1116. Anyone have expertise?
It does state on, https://www.irs.gov/individuals/international-taxpayers/nonresident-spouse
"Generally, neither you nor your spouse can claim tax treaty benefits as a resident of a foreign country for a tax year for which the choice is in effect. However, the exception to the saving clause of a tax treaty might allow a tax treaty benefit on certain specified income."
