facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog external search brokercheck brokercheck Play Pause

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.