As the tax season begins, we wanted to remind you that you are now potentially eligible to fund an IRA for you and your spouse (where applicable) for the 2015 and 2016 tax year and this could save you hundreds and even thousands of dollars in tax. This may be a last chance to reduce your 2015 taxes as the IRS extends the 2015 IRA contributions date to April 18, 2016.
Check out this example...
A husband and wife contributing the maximum contribution of $5500 each into a Traditional or Rollover IRA and who are in the 33% tax bracket save $3630 in taxes!
Those age 50 or over can contribute up to $6500 each.
However, not all the contributions are tax deductible and they vary based on the income level and filing status. Below are few key points to consider and check your eligibility.
1. You can contribute $5,500 per year to an IRA if you and/or your spouse are 50 years of age or less and $6,500 when more than 50.
2. To make a contribution, you must have earned income from employment above the Foreign Earned Income Exclusion (FEIE) of $101,300 in 2016 ($100,800 in 2015).
3. Your Traditional or Rollover IRA contribution may or may not be deductible depending on the degree to which your income exceeds the FEIE plus deductions and personal exemptions. Please refer the below income limit table:
Refer to this table if you are not covered by a retirement plan at work
Please note, your spouse doesn’t have to be working or earning above the FEIE in order for you to make a spousal IRA contribution on their behalf.
What about a ROTH IRA?
A contribution to a ROTH IRA might be a better option for you depending on your circumstances. These contributions are non-deductible but there is no age limit for contributions. ROTH IRAs have a favorable tax positions on contributions and withdrawals. However, there is income level restriction on contributions. If you contribute when your income exceeds the limit, the contributions are subject to penalty.
Please refer the income limit table below...
If you have a dormant defined benefit pension, a 401k, 403b or 457 deferred compensation plan back in the States, rolling it over to an IRA is a tax neutral option that opens the door to a much broader array of investment options.
Struggling to open an IRA?
We understand that it is a difficult task to open an IRA account if you are an expat and you’ll probably have a lot of questions about what is best for your personal circumstances.
If so, we would like to introduce you to a trusted friend and colleague. Vince Truong is the only US CFP® in the GCC. He has been in the region since 2009 and is best suited to assist you.
You can email Vince here: firstname.lastname@example.org
Click this link to view Vince's Linkedin Profile