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Greetings, Maggie, and welcome. You wrote:

<<If you take advantage of the foreign income exclusion to avoid taxation in the U.S. on those
earnings, then you will not be able to use those earnings as income on which to base allowable IRA
contributions, Roth or otherwise.


I have been working abroad for over a year and take advantage of the foreign income exclusion. I plan to return to graduate school in the US next year. I do not expect to be working during graduate school, which means that I will continue to have no taxable earnings on which to base an allowable IRA contribution. I am only 24 and would like to set up my first IRA (preferably a Roth IRA); however, from what I am reading on this board, that is not possible because I do not have taxable US income. My questions:

1.Has anyone successfully declined to exclude $2,000 from the foreign income exclusion and then used this taxable income for an IRA?
2. If option 1 is not feasible, has anyone living abroad found a creative way around this obstacle?>>

There was some discussion of that on the Tax Strategies board a few months ago. As I recall, there was some sentiment that approach could be used. There was also some sentiment that the IRS would not allow it. Neither side had any citations to support their position as I remember. Short of being able to decline the exclusion of income to support the IRA contribution, I know of no "creative" way to make one. I suggest you ask on the Tax Strategies board to see what the latest thinking is on this subject.

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