I am a US citizen, working (since 4 years ago) as a teacher in China. I earn $40000 per year and this income is excluded from my tax return. I am taxed in China, so I presume my accountant did this exclusion for me so I don’t pay taxes in the US for this income.
I have learned that I cannot use this income to contribute to a ROTH-IRA.
My question is: should I go back on the decision to exclude this income from US taxes? This would mean I have to pay taxes on it. But it would let me contribute $5000 to the ROTH.
Which one is better to have? A ROTH with the tax free compounding that it brings, or a higher income out of which I cannot contribute to a ROTH (but I can contribute to other, taxable vehicles)?
Thank you!
Question by jekelnHide: Foreign earned income exclusion and Traditional IRA to Roth IRA conversion taxes/ capital gains?
I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?
Best answer:
Answer by Jss
How can you have negative income unless you have loss from business or capital loss?
Just making sure that you are doing Form 2555 correctly.
Yes, it is always better to withdraw from IRA only when you have minimum income
For articles on your U.S. tax return, http://taxipay.blogspot.com/2008/04/list-of-articles.html
Know better? Leave your own answer in the comments!
I qualify for foreign earned income exclusion. This shows as a negative on income on the tax form. If I convert a traditional IRA to a Roth IRA, the IRS will withhold some taxes. Since my income is negative, can I get these taxes back at the end of the year? Alternatively, can my negative income offset capital gain taxes?
Using the Turbotax program, it takes the value from form 2555, and places it as a negative number in form 1040. Reading the instructions from form 2555, it says to place the value in parenthesis which indicates a negative, correct?
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