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Author: scottjolly Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Expatriot IRA Question Date: 2/2/2001 2:25 AM
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I moved to Japan in the tax year 2000, but had enough taxable income in the US to max out my IRA. The question is about next year. All my income will be exempt under the Foreign Earned Income Exemption. In no way is it advantageous for me to switch to the Foreign Tax Credit, as I am not liable for Japanese taxes either. (Not bad, eh?) My understanding is that I can therefore not contribute ANYTHING to my Roth IRA. Is this true? Are there any loopholes to this? I have a bank account in the USA that I fund all my investing from. Thanks in advance.
Scott Jolly
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45388 of 121482
Subject: Re: Expatriot IRA Question Date: 2/2/2001 12:13 PM
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If you don't have reportable earned income you can't contribute to an IRA. You can't have it both ways.

Ira

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Author: Couchcamel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45898 of 121482
Subject: Re: Expatriot IRA Question Date: 2/7/2001 3:33 PM
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I have been claiming the Foreign Earned Income Excusion since 1995, and every year I contribute to my Roth IRA, and to my wife's Roth IRA. That's not the problem. The tricky part is qualifying for the exclusion. You need to meet the Bona Fide Residence Test or the Physical Presence Test.

And, be careful, you still have to file a tax return, and you can only exclude up to $76,000 of your income. Any benefits you receive, such as company paid housing, plane tickets, school fees also gets included. You need to get a copy of IRS Publication 54 "Tax Guide for U.S. Citizens and Resident Aliens Abroad".

By the way, it's spelled "expatriate", not expatriot...

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Author: Dustweek Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 45911 of 121482
Subject: Re: Expatriot IRA Question Date: 2/7/2001 8:22 PM
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An important corollary to Couchcamel's comment ("and you can only exclude up to $76,000 of your income") is that you can only contribute to an IRA if your income exceeds the $76,000 credit limit.

From TMF's IRA page:

"Earned income that is excluded from gross income under the Foreign Earned Income rules is not considered compensation for purposes of determining the amount that can be contributed to an IRA."


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Author: YvesManoover Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46011 of 121482
Subject: Re: Expatriot IRA Question Date: 2/9/2001 6:56 AM
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Couchcamel: I have been claiming the Foreign Earned Income Excusion since 1995, and every year I contribute to my Roth IRA, and to my wife's Roth IRA.

Wow! How do you do that? My hazy knowledge is that you have to have U.S. earned income in order to plunk in to your Roth for a given year. As all my earned income is earned overseas, I thought that meant I couldn't make IRA contributions. Do you somehow still manage to have U.S. earned income every year, or is there something I'm missing?

Thanks,
YvesManoover

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Author: Couchcamel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46054 of 121482
Subject: Re: Expatriot IRA Question Date: 2/9/2001 2:23 PM
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Couchcamel: I have been claiming the Foreign Earned Income Excusion since 1995, and every year I contribute to my Roth IRA, and to my wife's Roth IRA.

Wow! How do you do that? My hazy knowledge is that you have to have U.S. earned income in order to plunk in to your Roth for a given year. As all my earned income is earned overseas, I thought that meant I couldn't make IRA contributions. Do you somehow still manage to have U.S. earned income every year, or is there something I'm missing?
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Er, actually, I never gave it much thought until now. I don't have earned income in the States. I guess I just assumed that you could contribute to your IRA even if you claimed the exclusion. The earlier post was correct, which stated that your contribution has to come from income above and beyond the exclusion. I checked my IRS Pub. 54 and found the following clause:

"Contributions to your individual retirement arrangements... are generally limited to the lesser of $2,000 or your compensation that is includible in your gross income for the tax year. Therefore, do not take into account compensation up to the amount of your foreign earned income exclusion and foreign housing exclusion, if any."

I guess I'd better download the Pub. 590 on IRAs just to be sure.

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Author: YvesManoover Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46113 of 121482
Subject: Re: Expatriot IRA Question Date: 2/10/2001 7:59 AM
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Sorry to give you a scare, you may still be right & I may just be creating a distinction that doesn't exist. When I said "hazy knowledge" earlier, I'm referring to when I posted such a question to irahelp.com, and the answer I got back, if I remember right, was that it had to be U.S.-earned. Unfortunately irahelp.com only keeps archives for up to 2 months, so I can't go back to my question and the answer.

So I'm with you there, I'll have to go slog through Pub 54 or 590 myself. But it seems to me Pub 54 wouldn't have a reference to IRAs on p. 29 if it didn't mean to imply that at least it's possible to make such a contribution, even though the income is foreign-earned.

If you find out anything, share the knowledge. Could be there's yet one more way for me to optimize my taxes for this year!

Thanks,
YvesManoover

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Author: mrlumu One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47024 of 121482
Subject: Re: Expatriot IRA Question Date: 2/23/2001 9:41 AM
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Hello fellow expats ,

I am by no means an expert but the way I read it is that as a US citizen no matter where your income is earned it is taxed. Once you reach the exclusion limit then all your income from that point can be considered for IRA contributions.
I'd also like to extend an invite for you to visit the expat fools board.

Mr Lumu

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 47030 of 121482
Subject: Re: Expatriot IRA Question Date: 2/23/2001 10:48 AM
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I am by no means an expert but the way I read it is that as a US citizen no matter where your income is earned it is taxed.

Yes.

Once you reach the exclusion limit then all your income from that point can be considered for IRA contributions.

Only your earned income above the exclusion limit can be considered for IRA contributions. Investment, rental, and other non-compensation income does not qualify you for an IRA.

Ira


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