Foreign Income to Make Roth IRA Contributions

Submitted by Todd Martin on Mon, 2018-04-09 20:16

Have a client that both spouses work in Australia. For 2017, they have income from a Canadian company and Australian. They are US citizens and have property in the United States. I didn’t think they could make contributions since neither of them had in US earnings. However, their accountant is filing a US federal and state return for 2017 showing over $90,000 of taxable income. Can they make Roth IRA contributions for 2017 based upon filing and paying income taxes in the US?

Thank you for your assistance,

T. C. Martin



Submitted by William Tuttle on Mon, 2018-04-09 22:53

  • You need compensation to make IRA contributions. It does not matter where the compensation is earned. The U.S. taxes its citizens on their world-wide income.
  • If they are using the foreign earned income exclusion, it is all or nothing.
  • If they have compensation left after applying the full amount of the exclusion, they can make IRA contributions from that amount.
  • If one of them has compensation left after making their IRA contribution and the other does not have sufficient compensation after the exclusion, they could make a spousal IRA contribution.
  • This should be readily determined with tax software.

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