How do I get TurboTax to stop attempting to assess taxes my Foreign Earned income?

We would need more information to answer your question. U.S. citizens and resident aliens pay tax on worldwide income.

 

It sounds as if you are a nonresident. In that case you should be filing Form 1040-NR. TurboTax does not support this form. You can use Sprintax.com, an awesome TurboTax partner, to prepare a nonresident return.

 

Capital gains are taxed at the source, meaning a nonresident will only pay tax on capital gains if the nonresident’s “tax home” is in the U.S. It’s possible you will not have to file a U.S. income tax return. Sprintax.com can help you.

 

These references may be helpful:

The Taxation of Capital Gains of Nonresident Alien Students, Scholars and Employees of Foreign Governments

What income is taxable for nonresident aliens in the US?

To enter foreign earned income in TurboTax, in the Search box type "foreign income" (without the quotes), then click the link that says "Jump to foreign income."

 

• Did you enter your foreign earned income in the foreign earned income topic in TurboTax?
• Did you select Yes when TurboTax asked if you want to exclude your foreign earned income?
• Did you get the screen that says "You Qualify for the Foreign Earned Income Exclusion"?
• On the screen that says "Here's The Amount of Foreign Earned Income You Can Exclude," did it show the full amount of your foreign income?

If you did enter your foreign earned income in the right place, and TurboTax confirmed the amount, why do you think that it is being taxed? If you are looking at forms or worksheets, please give specific form numbers and line numbers, and exact amounts.

You might be getting confused by the complicated way that the tax is calculated when you take the foreign earned income exclusion. The amount of excluded foreign income affects the tax on your other income because your other income, that is not excluded, is taxed at the same rates that would have applied to that income if you did not get the exclusion. The non-excluded income is "stacked" on top of the excluded income for the purpose of calculating the tax. To perform this stacking of income the tax calculation is actually done in three steps. This calculation is done on the Foreign Earned Income Tax Worksheet.

1. Calculate what the tax would be if you did not have the exclusion. That is, temporarily add the excluded amount to your taxable income and calculate the tax on the total.

2. Calculate what the tax would be on the excluded amount only, if that were your only income.

3. Subtract the result of step 2 from the result of step 1.

 

Ok ... so you think because you can exclude all the foreign income then NONE of the cap gains should be  taxable  but that is NOT how it works.   Review the cap gains worksheet in the PDF of the return to see how the tax is calculated correctly by the program ... the excluded income is added back for the tax calculation purposes per the IRS rules.