Our situation:
My husband and I are US citizen. We have a question for FY2024 Tax filing using Desktop version of TurboTax Home and Business. We are filling married jointly in the state of California. We claim standard deductions.
- Wife stayed in US entire year, earned income of (K1 + W2) $25,000
- Husband stayed in US from Jan till Aug 2024, earned income of $70,000
- Husband moved to Germany for PhD starting Sept 2024, earned income from University $11,000
- Husband paid Income tax in Germany for 4 months about $1200
- Husband paid health insurance in Germany for 4 months about $1400
Other information to get better response for TurboTax usage:
- Together we received ObamaCare premium assistance in California of about $12000 for both of us in 2024
- Husband established residency in Germany in September 2024 and the entire PhD program will take about 3-4 years.
When we try to enter his income earned in Germany, paid by his University, in Desktop version of TurboTax, it doesn't allow us to claim FEIE (Foreign earned income exclusion) because he hasn't stayed in Germany for 12 months so far even though he intends to stay there for 3+ years. He has established residency, i.e. register as a resident of the city in the local city hall, paying taxes, has valid visa as a student, has rental agreement, has health insurance etc. However in TurboTax we cannot claim his status to be bonafide foreign resident even though he intends to stay there for 3+ years. The physical test doesn't work out either since it has been only 7+ months since he has been living in Germany. He will be filing the German tax paper work in July (they have a longer deadline for annual tax returns than in US)
My questions:
1. How do we claim his entire German income as FEIE in turbotax? When we try to enter the start date of his residency in Germany as 08/30/2024, it doesn't recognize his income as FEIE because it doesn't meet the physical test or bonafide test as per TurboTax. Hence Turbo tax includes this income towards US taxable income and doesn't allow for any exclusion. What do we need to do to claim his income in Germany as excluded from US taxes?
2. This inclusion of his income from Germany on 1040 also reduces our CA Obamacare assistance and we have to return some $1500 back. How do we exclude this income from his University from the MAGI calculation and how do we add the health insurance premium of $1400 he is paying from his salary in Germany to the TurboTax to count towards our out of pocket health insurance premium cost so that we can claim it as our of pocket health premium cost.
3. Can we claim any deduction such as airfare, initial hotel stay, temporary accommodation, taxi, train fare when he moved to Germany to pursue his PhD?
4. How do we avoid double taxation on his German income?
Thank you for reading the entire situation and my questions. Any pointers would be highly appreciated.
If I find a solution to this situation from other sources and also from experts on this board, I will post my findings and how I solved this situation so that others can benefit from it.
