This page refers to something a little different, although the way it reads is rather confusing.
If you do not have any earned income on your tax return because you have excluded it all through the Foreign Earned Income Exclusion (FEIE), you are not eligible to contribute to an Individual Retirement Account.
Note the first paragraph at the same link reads: Contributions to your individual retirement accounts (IRAs) that are Traditional IRAs or Roth IRAs are generally limited to a certain annual dollar amount ($5,500 for 2014 through 2016, or $6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. (emphasis added.)
The Modified Adjusted Gross Income (MAGI) refers to the upper income limitation for deduction - in determining whether or not you can deduct a contribution (if eligible to make it), you must add back in the income (but not the housing deduction) that is excluded by the FEIE. So the add-back applies if you have included some earned income, to determine that your income is within the allowable range (not too high.)
If you are interested in contributing to an IRA as someone with foreign income you can consider, depending on the amount of your income, using only the housing exclusion. (If you wish to do this, you cannot use the online version of the program as you will need to override an entry on the Form 2555 itself and you cannot e-File the return.)
If you reside where you also pay foreign taxes, using the foreign tax credit instead of the FEIE will also allow for a contribution, but if you have taken the FEIE in the past this will be considered a revocation of the FEIE and you will be ineligible to take the exclusion for 5 years unless you obtain prior permission from the IRS. We caution against making this type of switch without consulting a tax professional to assist in determining if this is appropriate for you.
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