There are two basic ways to avoid double-taxation on foreign income (see this TurboTax discussion). If your wife only spends an occasional two or three months there, the “Foreign Earned Income Exclusion” is probably irrelevant, and you’re on the right track with the tax credit.
Here’s the basics of doing the Form 1116 in our program. (You can also get to the credit by going to “Federal Taxes”…”Deductions & Credits” (choose what you want to work on)…”Estimates and Other Taxes Paid”…”Foreign Taxes”). As the link says though, you’ll want to have all her foreign income entered first, and you put that (in U.S. dollar equivalents) wherever you would put it if it were earned in the U.S., with some exceptions (for example, enter wages without a W-2 in “Foreign Earned Income and Exclusion” under “Less Common Income,” instead of under “Wages and Salaries.” Just tell the program you’re not excluding it after the income itself is entered…).
The credit is the lower of the actual tax she paid there or the amount of your U.S. tax allocable to the net foreign income (which is why the program will be asking you some questions about related deductions). So if you’re seeing something like that at the end, there’s a good chance you did it right(!). The result can be seen on line 35 of the 1116, carrying to line 1 of Schedule 3, and line 20 of your 1040.
Also, @kuha, you’ll probably also see several questions that won’t be applicable to your situation, and some others you’re not sure about, so re-posting here would be a good idea (especially if you end up seeing an unexpected credit amount!).
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