It depends. the foreign income exclusion in 2020 is $107,600 per qualifying person. if your wife's income exceeded the exclusion amount, she can claim a foreign tax credit for the excess. For an example, if she earned $137,600, she can claim a foreign tax credit based on $30,000 worth of income. ($137,600-107,600) Turbo Tax will make this calculation if this is the case.
You can also work your scenario both ways in Turbo Tax to see which will give you the best return.
- First use a a scenario where her foreign income is excluded. Remove it the exclusion
- Next report the income(without the exclusion) but claim a foreign tax credit paid to the foreign country.
- See which gives the best result.
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