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I have been living abroad for several years now, but while I was in the States, I started a Roth IRA. I would like to start contributing again, but I'm not sure how exactly to go about it. My salary is paid by a non-U.S. company, and is deductable via the 2555-EZ form, so I'm assuming it doesn't fall under the category of taxable earned income. Would I just deduct all of my salary but the portion that I contribute to the Roth IRA?

Thanks for any thoughts or answers.

Update I'm adding information that I think is relevant to my question from http://www.irs.gov/publications/p590/index.html. I have removed what I consider to be excess information.

  1. From chapter 2:
    Generally, you can contribute to a Roth IRA if you have taxable compensation...
  2. From chapter 1:
    What Is Not Compensation?
    Compensation does not include any of the following items.
    • Earnings and profits from property, such as rental income, interest income, and dividend income.
    • Deferred compensation received (compensation payments postponed from a past year).
    • Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

So by the second point in 2., it would seem that I can't count income from previous years, otherwise why have a deferred income exception. Also, by the first point, if I can't contribute interest/dividend income, then I'm not sure if I could prove that my contribution is coming from "compensation" from a previous year. However, I'm not sure if I'm able to exclude only part of my foreign earned income so as to be able to contribute, and if I can, how to go about doing so.

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I'm sure I'm missing something here, but I don't think one thing has anything to do with the other. The source of the money going into a Roth doesn't matter (as long as it has been taxed). It doesn't have to be directed from your income for the year, it can come out of savings or from any other source.

One caveat to this is that your income must be below a certain threshold to be able to contribute to a Roth, otherwise you will have to contribute to a traditional IRA and then convert it to a Roth (I believe up to a limit of $5K).

  • thanks for your thoughts, I have updated my question to include what I feel to be relevant information. – jswolf19 Feb 15 '11 at 12:05

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