Well, I just spent a good 2 hours on the phone with Turbo Tax to no avail. However, I did get some helpful information that could maybe help someone else (even though it didn't work for me) so... I will share here for anyone interested.

An interesting thing you can see on Turbo Tax is a Detailed Tax Summary which shows which values the software is inputting for every Line of a paper tax filing. To see this, click the left bar menu then: Review -> Bottom Line (Tax Summaries). To the right, next to the white document and magnifying glass, you will see "Detailed Tax Summary". Clicking this will show you the Lines as ordered on paper Income Tax Returns. Scroll down to 25600 Additional Deductions. This is where we want our foreign income exempt under a tax treaty to appear.

Now, the two ways I described to input foreign income both set the foreign income as Line 10400 which is great. The second method is through Income -> Other Income Sources -> Income not reported on a T-Slip and clicking "Received tips, gratuities ...." then pressing Continue. However, don't do this method. Instead, follow the first method: Income -> T-Slips -> Foreign Income. Then click Enter a Foreign Income and complete the foreign slip with foreign income under "Foreign Employment Income". This is where you'll clearly notice that there is **no space to input foreign employment income exempt under a tax treaty** !! How strange...! TurboTax ????

That's ok, let's try something else. After completing and pressing continue, click the left menu bar and click: Deductions -> Payment Profile -> Foreign Tax Credit. Since you input a foreign income, there should already be an entry for the country of your foreign income. Click edit and scroll down... oh ? What's that ? A box that says "Deductions from foreign employment income" ? Ok.. maybe that will work. If you are trying to exempt your entire foreign income, input the entirety of it again here. After pressing continue, find your way back to the "Detailed Tax Summary" through Review->Bottom Line and see if this number is now reflected under Line 25600 Additional Deductions.

Now after reading through all of this and trying, chances are you're ripping your hair out. Well keep ripping ! Even after all of this, the value in Line 25600 would not change. Eventually, the TurboTax agent, who might I add was very kind and as helpful as she could be, told me to call the CRA to confirm that I was actually entitled to this tax treaty which... well, would be useless to what I needed help with but... ok, I tried. And yes, they couldn't help me because its the government.

All this to say, I truly think there is absolutely no way on the online (or perhaps only free online) platform to input a foreign income that is exempt under a tax treaty. So, TurboTax, what's up ? I am at wit's end and don't know what to do. I will most likely use an alternative online filing platform since this has caused so much grief and there seems to be no answer. It seems like a major oversight and also something that is actively being half-answered online.

I hope you are able to provide me, or anyone trying to do this same filing type, with answers as to how to do this on your somewhat disappointingly unclear software. Thank you for any help you can provide !!

Hello Adrian,

I don't expect you are still accessing the turbtax community forum, but -- if you are --  I was wondering if you found another online tax software that allows input of foreign income exempt under a tax treaty?

Sharon

You can use the Foreign Slip to report the foreign employment income.

Then use the "other deductions" to report the exempted portion:

you can access this from the search engine on the top bar or from the left side menu --> deductions --> other deductions --> miscellaneous --> continue to the next page "Additional deductions"

Use the "other" box and add a description such as "exempted foreign employment income under a tax treaty"

You should be able to see the amount on line 25600

I hope this was helpful

I have tax exempt income from an inherited Roth IRA and it is impossible to input it without tax being owed on it. I will be forced to either hire a tax accountant or try to do a paper return myself. Come on Turbo tax fix this problem!

For me it showed up in the Bottom line detailed view as Taxable income field 25600 (Additiona deductions) after I filled the filed in "Income > T-Slips > Foreign Income > New Foreign Income > Investment income exempt under a tax treaty". 

Not sure how this relates with the Employment Foreign Income Exemption as the field says Investment, but the outcome on the Bottom line seems to be the same, the problem seems the field's label is misleading.

Thank you. I think I figured it out last year. I made notes on how to do it...now i just need to find my notes LOL

I will keep what you wrote to help me figure it out again this year.