Foreign Income Exclusion

[Bert0611]

Taxpayer and spouse are US citizens who are currently living in Canada.
TP works at a Canadian university as a W2 equivalent employee and has some income from lectures as well.
Wife does not work but has a teachers pension from Scotland.  The pension is taxed in Scotland.
They jointly own a home in Scotland which they are currently renting.  The rental property is not taxed in Scotland
They each have filed their required Canadian returns.  On the TP's return the wages, self-employment income and 50% of the rental income are taxed.
The spouse's return shows the pension and 50% of the rental, both of which are taxed.

They meet the bonafide resident requirement so there is no problem eliminating the TP's wage income.
I am just wondering do I eliminate his self-employment income and rental income on the 2555 as well and then do the same for his wife with her pension and rental portion.

Some advice on this would be appreciated.

Roberta

[TaxGuyBill]

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@Bert0611 wrote:

I am just wondering do I eliminate his self-employment income

and rental income on the 2555 as well

and then do the same for his wife with her pension

and rental portion.

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Self employment income should also be on the 2555.  If you are referring to SE tax (Social Security and Medicare), is the taxpayer also paying SE tax to Canada?

Rental and pension income is not "earned", so that does not go on the 2555.  If they are paying foreign taxes, you may be able to use the Foreign Tax Credit on Form 1116.