I used to live in the U.S. on a H-1B and returned to my home country in the year 2017. However, I still have some U.S. ETFs and equities in a brokerage account. I also have a IRA account. I have no other sources of U.S. income.
I was wondering if I could take the dividends from my holdings as well as any capital gains I get from selling the equities and put it into the IRA (under the $5500 limit) and avoid paying taxes on the dividends and capital gains?
No. IRA contributions need to come from taxable earned income (called taxable compensation below), not from passive income such as interest, dividends, capital gains, pensions etc.
From the IRS: Retirement Topics - IRA Contribution Limits
For 2015, 2016, 2017 and 2018, your total contributions to all of your traditional and Roth IRAs cannot be more than:
- $5,500 ($6,500 if you’re age 50 or older), or
- your taxable compensation for the year, if your compensation was less than this dollar limit.
while this next quote mentions Roth IRAs it applies to both types of IRAs.
Can I Invest in a Roth With Just Dividend Income?
Roth IRAs hold several advantages over traditional IRAs. However, both types of IRAs require earned income for contribution eligibility, so if your earnings are strictly from dividend income you cannot invest in a Roth IRA. If you and your spouse file jointly and one of you has earned income, you can both contribute to Roth IRAs, as long as you meet the annual income limitations. For IRA purposes, earned income includes wages, salary, tips, commissions and bonuses.
