I'm a U.S. citizen living abroad claiming the Foreign Earned Income Exclusion (FEIE). According to https://www.americansabroad.org/us-taxes-abroad-for-dummies-update/,
The exclusion applies only to earned income. Other income, such as pensions, interest, dividends, capital gains, etc., cannot be excluded with the FEIE. You are liable for full US tax on this type of income.
However as I understand it, the FEIE is entered as a negative number on Line 21 ("Other income") of form 1040, and then combined with all other sources of income (including dividends (line 9a) and capital gains (line 13)) to obtain the total income (line 22), in which case it would seem to effectively 'apply' to these types of income.
Can someone explain this apparent discrepancy?