I am a US citizen and have started a new job working at a US university. However, I live outside of the US and am considered domiciled permanently abroad (I have a "Bona Fide" residence outside of the US).
There is a possibility to sign up for a 403b account through the university, whereby some of my income would be taxed deferred.
The way I understand the Form 2555 is that all of my income will not be taxed by the US, since it falls below the maximum allowable value for the Foreign Earned Income Exclusion (roughly $103k). Or, more properly stated, it will be taxed but then there will be a credit back for Foreign Earned Income Exclusion equal to the amount of tax paid to the US. If this is the case, then wouldn't it make sense to NOT contribute to the 403b account?
My thinking is that any contributions to the 403b will be taxed when they are disbursed from the account.
This is opposed to taking all of my income now and using the foreign earned income exclusion (Form 2555) to reclaim any US tax paid on it at the end of the year. This would essentially give me my entire year's income tax free (minus anything I have to pay to my host country).