There is more than one way to avoid paying extra tax when living abroad. Most people go straight to the foreign earned income exclusion because it is the one that is talked about the most. However, it has a number of drawbacks. The inability to contribute to certain retirement accounts is one, being unable to receive refundable child tax credits (where applicable) is another.
There are two strategies that can work, depending on your circumstances. One is to use the foreign tax credit instead of the foreign earned income exclusion. This one works if you are paying taxes to your resident country at a rate greater than or equal to what you would pay in the U.S. This is almost all countries that collect a personal income tax. There are some exceptions, of course (Singapore comes to mind) but by and large, U.S. income tax is low compared to the rest of the world.
If you are fortunate enough not to be paying taxes to another country, you could take a look at the option of taking only the foreign housing exclusion (or deduction for the self-employed), and not the income exclusion.
The housing exclusion is based on expenses paid by "employer-provided funds" - but your salary is considered employer-provided funds. It is calculated daily and a full year in a city that doesn't have a higher differential could allow you to exclude $38,280. Higher amounts range as high as $114,300 (Hong Kong). You can check your location here: https://www.irs.gov/irb/2020-11_IRB#NOT-2020-13 If it's not on the list, it's $38,280.
When you combine this with the standard deduction for your filing status, it could be enough to eliminate tax depending on where you are living and the amount of income you have earned.
You do have to take care with this if you have previously filed using the foreign earned income exclusion. Failing to use the exclusion in each year eligible after the first year amounts to revoking it. Once revoked, it cannot be used again for 5 years without permission from the IRS (which is expensive to get- $2,000!)
TurboTax online cannot handle the housing exclusion only (unless it has changed this year) but the downloaded version of the program allows you to work more on the forms directly which is where you can force that option. It's perfectly okay to do this, it's just that this type of thing is not the sort of thing that TurboTax customers are doing in large numbers, so it's not a focus of the program.
Take care if you've used the exclusion in the past before switching to be sure it is right for you but simply switching to the tax credit alone if you are paying taxes has several benefits to you and is usually the better way to go when it eliminates your US liability.
