@irritatedExpat , first I need a few details -- (a) when did you arrive in the UK; (b) is your wife working and living in the USA or she is with you and working remotely; (c) is this the first year you are trying to exclude foreign earned income; (c) your foreign income is from self-employment / sole proprietor business or being employed by a local entity; ( d)what is you gross income in the UK and that of your spouse in the USA (if she gets a W-2 then the Box 1 amount ); (e) Shew is US citizen/Resident ( Green Card ) ??
Generally, the amount of excluded amount does not show up on your gross income but it impacts your tax rate i.e. the marginal rate is based on world income ( including the excluded amount). Also the foreign tax credit , while recognizing the amount paid ( converted to US$), the allowable amount for the year is limited essentially by a ratio of foreign income to world income. Thus , often when one spouse has large US income and the other spouse has a smaller foreign income, it may be more tax advantageous to file as MFS ( Married Filing Separate ) .
Please answer my questions and I will come back and help out
pk
