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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75809  
Subject: Re: Move to foreign country with IRA Date: 3/9/1999 10:23 AM
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Greetings, Kmshashi, and welcome. You asked:

<<I have these questions:

1. In case of education IRA, can we take distributions for higher education if we reside in a foreign country.
2. In case of Roth IRA, can we take distributions ( tax free & penalty free) for first time home buying in a foreign country.
3. Can we keep the investment in an IRA and the change the residence to another country>>


For a definitive answer, you may wish to ask this question on the Tax Strategies board where the Foolish tax pros hang out. All I know for sure is that is the topic of international tax arrangements is very complex and subject to the agreements made between our government and that of the country in question. Therefore, usual tax rules may not apply when you're in a different country of residence.

As to the first home purchase rules, I see no requirement in the law that the home must be located in the United States. Thus, I would think that if you otherwise meet the criteria for a qualified Roth IRA distribution, any withdrawal for that purpose would not be subject to our federal income taxes. I can't speak to those of the other country, though.

An Education IRA withdrawal used to pay for the qualified expenses of a higher education at an eligible educational institution would be free of our federal income taxes and early withdrawal penalty. So again I would think as long as the institution is one approved by the IRS, you would be okay. The IRS says, "An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution that is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088) and, therefore, eligible to participate in the student aid programs administered by the Department of Education. This category includes virtually all accredited public, nonprofit, and proprietary postsecondary institutions. (The same eligibility requirements for institutions apply for the Hope Scholarship Credit, the Lifetime Learning Credit, and early withdrawals from IRAs for qualified higher education expenses.)" If the school meets that criteria, then again I would surmise the withdrawal will escape taxes and penalty in this country. Again, what happens in the other country is open to question.

You may maintain an IRA here even though you live elsewhere; however, you should be aware that distributions for those residing abroad will be subject to withholding taxes. You should see IRS Publication 590 (Individual Retirement Arrangements) for details. You can obtain it at the IRS wesite at www.irs.gov.

Regards….Pixy
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