I came across an interesting article on a website forum. Someone was wondering what alternatives there were to a 401k. This individual was changing employers and was now required to work oversees. Since the employer was not U.S.-based, they obviously don’t offer a 401k, so the person was wondering if they were able to make contributions to their IRA while living oversees.
First, you have to keep in mind that your IRA contribution is limited to taxable income. If you only have $3,000 in taxable income, you can only contribute $3,000 to your IRA. Second, if you are a U.S. citizen, foreign income received is subject to income taxes in the United States. Whether you live in the United States or abroad, you are still be required to file your taxes.
Please keep in mind that you can also take advantage of various tax laws to help minimize the tax damage from foreign income. A limited amount of foreign-earned income can be excluded and deductions can be claimed for foreign taxes. Please read IRS Publication 54 for more details. The IRS Publication is very helpful in understanding the tax implications of U.S. citizens working and living abroad.
Back to the issue at hand of whether you can contribute to an IRA while working in a foreign country, as long as you file a U.S. tax return and have taxable income, you can make IRA contributions up to your taxable income and IRA contribution limits even if you are working and earning foreign income.