I am married and living abroad and working in Japan. My wife is Japanese, discontinued green card. Do I have to include her income as we file jointly. (income small)

[ReneeM7122]

Yes.  

Because you file Married Filing Jointly, your wife (a Nonresident Alien) would be treated as a resident alien for U.S. tax purposes, and her worldwide income would have to be included on your tax return.  The IRS states that if, at the end of your tax year, you are married and one spouse is a U.S. citizen or resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U.S. resident and file your tax return Married Filing Jointly. Here's an IRS discussion about the joint return election.  In this scenario, your wife will be treated as a resident alien for tax purposes and her income in Japan would be subject to tax. 

Please not that she cannot qualify for an exclusion from foreign earned income because of the fact that she has surrendered her green card. 

You can also file Married Filing Separately or, if you and your wife have a dependent, Head of Household.  As long as your wife doesn't have income in the U.S., there is no requirement for her to file.

[bodhi24]

Very helpful thank you so much