BackgroundI'm currently on H1B visa and got married Nov 2021 outside of the US. My spouse lives outside of the US for the whole year and has incurred some foreign incomes for different countries (all non US).Some are wages for specific countries and some are RSU, whose taxes (at least withholding tax) is prorated based on the physical presence days in different country within the grant date and vest date time range. My spouse spent 2/3 of the time in the US and thus has a W2 and US withholding taxes.My spouse does have SSN. Things I knowI can only file MFS or MFJ instead of single.Basic calculation suggests that filing as MFJ makes more financial sense. And in order to do so, I need to paper file the tax return and include a statement to file jointly and my spouse's tax status will be treated as resident alien.We could use form 2555 (foreign income exclusion) or form 1116 (foreign tax credit) to avoid double taxation.We will need to report foreign accounts if at any point of the time the combined value exceed $10,000. Questions:Can I get some confirmation if my understanding above are correct?Can we use form 2555 for my spouse since they've been outside of the US for the while year or I also need to pass the 330 days test?My understanding is that we can use form 2555 or form 1116 on the same income but not both. Are there any restrictions on only being able to form 2555 instead of form 1116 if my spouse is outside of the US for the whole year? We find it financially favorable to use form 1116 (surprisingly). Thanks for any insight in advance!

Question

Foreign income exclusion or credit with non resident spouse

Forum|Forum|4 years ago
March 23, 2022
1 reply
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Background

I'm currently on H1B visa and got married Nov 2021 outside of the US. My spouse lives outside of the US for the whole year and has incurred some foreign incomes for different countries (all non US).

Some are wages for specific countries and some are RSU, whose taxes (at least withholding tax) is prorated based on the physical presence days in different country within the grant date and vest date time range. My spouse spent 2/3 of the time in the US and thus has a W2 and US withholding taxes.

My spouse does have SSN.

Things I know

I can only file MFS or MFJ instead of single.
Basic calculation suggests that filing as MFJ makes more financial sense. And in order to do so, I need to paper file the tax return and include a statement to file jointly and my spouse's tax status will be treated as resident alien.
We could use form 2555 (foreign income exclusion) or form 1116 (foreign tax credit) to avoid double taxation.
We will need to report foreign accounts if at any point of the time the combined value exceed $10,000.

Questions:

Can I get some confirmation if my understanding above are correct?
Can we use form 2555 for my spouse since they've been outside of the US for the while year or I also need to pass the 330 days test?
My understanding is that we can use form 2555 or form 1116 on the same income but not both. Are there any restrictions on only being able to form 2555 instead of form 1116 if my spouse is outside of the US for the whole year? We find it financially favorable to use form 1116 (surprisingly).

Thanks for any insight in advance!

Not A Product Question

R

RobertB4444

If your spouse was in the country for two thirds of the year then they fail both of the tests for the foreign earned income exclusion anyway. And the foreign tax credit is almost always better - it is a dollar for dollar reduction in your taxes owed.

Otherwise your understanding of what you need to do is exactly correct.

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