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acferrad
Level 1

The tax calculated by Turbotax in box 44 of the 1040 is not correct if Foreign Earned Income Exclusion has been used in the calculation for Taxable Income.

The tax calculated by Turbotax in box 44 of the 1040 is not correct.  If I take the amount in line 43, and use Married File Jointly, I don't get the number reported in box 44.  I have a Foreign Earned Income Exclusion amount.  If I remove that (and remove it from the Income box 7 too so that box 43 is the same number) I get the correct number in box 44.  However I thought this exclusion was only used to calculate the AGI and thereafter the taxable income, but once the latter was established, the tax calculation should be the same.

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Accepted Solutions
TaxGuyBill
Level 9

The tax calculated by Turbotax in box 44 of the 1040 is not correct if Foreign Earned Income Exclusion has been used in the calculation for Taxable Income.

No, the tax calculation is not the same.

The calculation takes the tax on the total income (including the foreign income) then subtracts the tax on only the foreign income.  That effectively means the foreign income 'uses up' your lower tax brackets, and the rest of your income is now in higher tax brackets.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=43


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3 Replies
TaxGuyBill
Level 9

The tax calculated by Turbotax in box 44 of the 1040 is not correct if Foreign Earned Income Exclusion has been used in the calculation for Taxable Income.

No, the tax calculation is not the same.

The calculation takes the tax on the total income (including the foreign income) then subtracts the tax on only the foreign income.  That effectively means the foreign income 'uses up' your lower tax brackets, and the rest of your income is now in higher tax brackets.

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf#page=43


View solution in original post

acferrad
Level 1

The tax calculated by Turbotax in box 44 of the 1040 is not correct if Foreign Earned Income Exclusion has been used in the calculation for Taxable Income.

Actually yes I just discovered!  My foreign income is added to my US income and taxed at my marginal rate, but when it is excluded the tax rebate is assuming this is my only income and therefore taxed at a much lower rate.  Kind of unfair.
Critter
Level 15

The tax calculated by Turbotax in box 44 of the 1040 is not correct if Foreign Earned Income Exclusion has been used in the calculation for Taxable Income.

Taxes & life is not always fair.
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