Better to file MFS vs MFJ in US with high Canadian income?

[languageladki]

Hi. I'm a US citizen and my husband got his green card and entered US in April 07. Both he and I have US wages (his wages come from job here beginning in June) and he has about $80,000 CAN in wages from his job he had in Toronto before leaving for the US.

I know that basically we have two filing options for the US return:
A) fileform 1040 MFS and he can include US income only and I THINK we will both pay slightly higher taxes on what we earned and lose some deductions and credits and
B)file MFJ and pay tax on all the income and exclude part of it. It seems like doing this we will get slammed with tax on the portion earned in Canada.

My problem is that when I looked at the 2555 it looks like the amount you can exclude is prorated based on the amount of time you were still in your country for 2007. So if he was only in Canada for 100 days of 2007 he can only exclude about 1/3 of the $85000 maximum exclusion. Is that right or did I read that form wrong?

If that is the case, is it better for us to file separately and avoid the extra tax on the approximate $50,000 remaining (since it is my understanding that we can't take a credit on the tax from that money anyway) or should we definitely file jointly even if we take a tax hit just to have a joint return when we have conditions removed from my husband's CR1 visa this next year?

Will it be looked up negatively by the USCIS and the American govt if we don't have a joint return (even if we have a joint lease, joint bank account, a baby, etc)?

Oh....thanks for this WONDERFUL forum

[nelsona]

You can use 1116 to get credit, eithr on all the wages or on the part that exceeded the 2555 exemption.