Roth IRA question
Right now we are teaching in Macedonia for a school called QSI Skopje. It is an international school. We want to put money into our ROTH IRA but are not sure if we legally can. We earn foreign earned income, that I know. Our pay, which is deposited in dollars into our MAPS account, is tax free.
Anyway, could you tell me, if you know, can we invest this money in our ROTH?
Permalink Submitted by Alan Spross on Fri, 2010-12-17 22:17
You must have earned income for an IRA contribution, and any income that is excluded under the foreign earned income exclusion cannot count as earned income. If your income is higher than the foreign exclusion allowable, you would have some earned income. But you cannot limit your foreign exclusion, ie you cannot opt to exclude all but the amount needed for a Roth contribution. If you exclude any such income you must use the full exclusion available.
However, if you also are eligible for the foreign housing exclusion, you could elect not to use that exclusion while still using the foreign earned income exclusion. But generally, using the exclusion provides a better benefit than the IRA contribution if you cannot do both.
Permalink Submitted by Anonymous (not verified) on Sat, 2010-12-18 01:41
Ask your school to set up a 401k plan and make your contribution as a Roth 401k, avoids the problem of needing “net” income after the foreign income exclusion