For U.S. taxpayers residing overseas, contributing to a Roth IRA offers a powerful opportunity to build tax-advantaged retirement savings over the long term. However, the rules surrounding eligibility can be complicated, particularly when the foreign earned income exclusion and international tax treaties are involved. This article explores the key considerations expatriates need to consider when planning to contribute to a Roth IRA while living overseas. A Roth IRA is a retirement account where you contribute after-tax money and enjoy tax-free growth and withdrawals in retirement, offering flexibility, no required distributions, and potential tax savings.

Requirements to Make a Roth IRA Contribution

To contribute to a Roth IRA, a taxpayer must meet the following basic requirements:

  • Have earned income: Contributions must come from compensation or earned income, which typically includes wages, salaries, self-employment income, and similar earnings.
  • Meet income limits: Roth IRA eligibility phases out at higher incomes. In 2025, the Modified Adjusted Gross Income (“MAGI”) limits are $150,000 for a single filer and $230,600 for joint filers. Those below the range can contribute up to the lesser of their compensation or the annual limit. Within the phase-out range, contributions are reduced proportionally based on income.
  • Be within contribution limits: The 2024 and 2025 contribution limit is $7,000, with catch-up contributions of $1,000 allowed for those aged 50 and up.

 

Special Consideration: The Foreign Earned Income Exclusion (FEIE)

One of the most significant barriers for expats to make qualifying Roth IRA contributions is the Foreign Earned Income Exclusion (FEIE). The FEIE allows eligible taxpayers to exclude up to $130,000 (for 2025) of foreign earned income from U.S. taxation. However, here’s the catch: Excluded income is not considered earned income for IRA purposes. This means if you exclude all your foreign earned income using the FEIE, you have zero earned income for IRA contribution purposes, and thus, you cannot contribute to a Roth IRA.

To determine eligibility for Roth IRA contributions, the IRS uses Modified Adjusted Gross Income (MAGI), which is calculated by starting with your Adjusted Gross Income (AGI) and then adding back certain deductions—including the Foreign Earned Income Exclusion (FEIE); this means that even if your AGI appears low due to the FEIE, your MAGI could be much higher, potentially disqualifying you from contributing to a Roth IRA.

This rule impacts U.S. taxpayers living abroad, as their foreign income—though excluded from AGI under FEIE—is still counted in MAGI, reducing or eliminating their ability to contribute to a Roth IRA.

 

When Can an Expat Contribute to a Roth IRA?

There are several scenarios when a U.S. taxpayer abroad can make qualifying Roth IRA contributions:

  • If a taxpayer elects to forego the FEIE and report all foreign earned income, taxpayer can treat it as U.S. taxable earned income—eligible for IRA contributions. This strategy works well when claiming the Foreign Tax Credit, especially with low foreign taxes or a focus on maximizing U.S. retirement savings.
  • If a taxpayer abroad has earned income from U.S. sources and MAGI below the income threshold, this income can qualify for Roth IRA contributions if it’s not excluded.
  • If the taxpayer earns more than the FEIE limit (e.g., more than $130,000 in 2025), the excess income is not excluded and can be used to justify Roth contributions—provided other requirements are met.

 

Tax Treaties and Other Considerations

U.S. tax treaties may offer relief, but they don’t override the rule: Roth IRA contributions must come from U.S. taxable income. If income is excluded—via a treaty or the FEIE—it typically doesn’t qualify. And while Roth IRAs grow tax-free in the U.S., expats should beware: some countries may tax contributions, earnings, or withdrawals, risking double taxation.

 

Conclusion

Contributing to a Roth IRA from abroad requires more than financial intent—it hinges on having U.S. taxable earned income. The Foreign Earned Income Exclusion can limit eligibility, but using the Foreign Tax Credit or earning above the exclusion cap (while meeting other requirements) can keep the door open. With careful considerations and planning, expats can still take full advantage of Roth IRA benefits and avoid the unnecessary 6% a year tax on excess contributions.

 

Disclaimer: This information has been prepared for informational purposes only, and is not

intended to provide, and should not be relied on for, tax, legal or accounting advice. Expats should consult with tax professionals to optimize their tax planning, ensure compliance with updated international rules, and take advantage of enhanced credits and deductions.