The country where I live does not tax it, So this is not an income? What about deductions?

The IRS does not care how your foreign country, where you reside and make money taxes income. If the income is not specifically excluded in the Internal Revenue Code, it is taxable. Section 61 leaves little doubt: unless otherwise provided in this title, gross income means all income from any source. There is no exception for income that is not taxed by a foreign country. If your country of residence does not tax your unemployment income abroad, good for you. If you don’t tax your investment earnings, well, you’re lucky. The same is true for severance pay, auto allowances, and other employee benefits that may be tax-free abroad, but are taxable under US tax rules. All earnings must be assessed under US tax regulations. US tax rules and file accordingly.

Deductions are determined according to US tax rules, and your deductibility in a foreign country may not be applicable to your US taxes. Variations between what is deductible in one country and another can sometimes result in significant differences between the amounts on the foreign tax return reported abroad and on the US tax return. For example, in some foreign countries, secondary, middle and high school tuitions are a tax deductible expense while in the US they are not.