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I live abroad and take the foreign earned income exclusion. Am I qualified to contribute to a Roth IRA if my 1040 Line 7 is above the limit but my AGI is negative?

Forum|Forum|7 years ago
June 6, 2019
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Best answer by DoninGA

Foreign earned income is not taxable compensation for IRA contribution purposes. If you have no other taxable compensation other than the foreign earned income you cannot contribute to an IRA.

See IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) - https://www.irs.gov/publications/p590a#en_US_2016_publink1000230366

Go to this IRS website for IRA contributions - https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...

DoninGAAnswer

Employee

Foreign earned income is not taxable compensation for IRA contribution purposes. If you have no other taxable compensation other than the foreign earned income you cannot contribute to an IRA.

See IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) - https://www.irs.gov/publications/p590a#en_US_2016_publink1000230366

Go to this IRS website for IRA contributions - https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-li...

S

sbwalling

I disagree with the answer given regarding the ROTH IRA contributions and the Foreign Earned Income Exclusion. IRS Pub 590; Worksheet 2-1. Modified Adjusted Gross Income for Roth IRA Purposes clearly shows that you add any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 to generate the Modified AGI for Roth IRA contribution limits. This makes sense as the Foreign Earned Income exclusion is solely to avoid American expats being double taxed on their income in both the foreign country and the USA.