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What are the Tax Implications of Making Roth IRA Contributions if I Take a Job Overseas?

Retirement Accounts Tax

Here's an unusual and interesting question I responded to a few months back....


If I take a job overseas, what would I need to consider about contributions I make into my Roth IRA with regards to taxes? I am looking to start working overseas this year. I am a US citizen and I am investing money in a Roth IRA.


You'll want to be aware of at least three issues:

1. Earned Income

Roth IRA contributions can be made provided you have sufficient earned income. But "earned income" does not include any income and/or housing costs you exclude under the foreign earned income exclusion or foreign housing exclusion or deduction. The Roth IRA contribution limit for 2016 is $5,500, plus an additional $1,000 for folks age 50 or over. Contributions can be made for yourself and also for your spouse if applicable (and you have sufficient earned income).

2. Phase-Out

Only those whose modified adjusted gross income (MAGI) is within limits can make direct Roth IRA contributions. For 2016, Roth IRA contribution eligibility phases out between $117,000-$132,000 for single filers and $184,000-$194,000 for married filing jointly. If you claim a foreign earned income and/or foreign housing exclusion, you must add that back in the calculation of MAGI to determine if you're eligible to make a Roth IRA contribution.

3. "Foreign" Accounts

In recent years, the US significantly tightened regulatory requirements with respect to foreign financial accounts and US financial accounts owned by folks with non-US addresses. The result is a lot of custodians won't deal with (or only reluctantly) a "foreign" account owner, unless you have a US address or have granted power-of-attorney for the account to a US resident (which can raise its own potential issues).

Treat this as general information and not personalized advice...cross-border taxation is a complex subject and you may have other factors to consider. I hope it's helpful and wish you all the best.