My wife is working abroad and qualifies as bona-fide resident with a work visa. I am living in US maintaining our prime residence (kinda sucks, I don't recommend it). She qualifies for the foreign income exclusion, which reduces her income $109,764. Can I also do a foreign tax credit since she is paying taxes there?
For simplicity, I am filing jointly, but it might make sense to file separately.
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No. You can take one or the other. But you can not take both. That is, assuming that you would "in fact" qualify to have the choice.
From IRS publication 54:
"Foreign tax credit or deduction. Once you choose to exclude foreign earned income, you can’t take a foreign tax credit or deduction for taxes on income you can exclude."
Can I get a foreign tax credit for taxes paid above the exclusion amount? Seems fair, but the paragraph quoted above mentions "If you do take a credit or deduction for any of those taxes in a subsequent year, your election for the foreign earned income exclusion will be revoked beginning with that year." There is a good chance they will misread your intentions and drop the exclusion all together.
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