Deductions & credits

Unfortunately, the IRS webpage seems to be wrong.  I suspect that paragraph MEANT to say that the Foreign Earned Income Exclusion is added back for purposes of your MAGI, which can affect your IRA contributions.

 

IRS Publication 590a makes it pretty clear, and it coincides with what Tax Code says that it the "compensation" must be "includible in the individual’s gross income".

 

IRS Publication 590a:

 

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

  • Earnings and profits from property, such as rental income, interest income, and dividend income.

  • Pension or annuity income.

  • Deferred compensation received (compensation payments postponed from a past year).

  • Income from a partnership for which you don’t provide services that are a material income-producing factor.

  • Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040 or 1040-SR), line 1b.

  • Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

https://www.irs.gov/publications/p590a

 

Roth Limit §408A(c)(2)(A)

https://www.law.cornell.edu/uscode/text/26/408A#c

 

Which point to §219 which requires it to be "includible in the individual’s gross income".

https://www.law.cornell.edu/uscode/text/26/219