topic With the Foreign Earned Income Exclusion can you choose to take less than the amount you qualify for? in Deductions & credits

With the Foreign Earned Income Exclusion can you choose to take less than the amount you qualify for?

LivingAbroad1 — Sat, 17 Oct 2020 14:19:51 GMT

I have been living abroad for many years and using the FEIE (I have never revoked it). I now want to contribute to my Roth IRA, but the FEIE makes my taxable compensation $0, which means I can't make a contribution. May I choose to take less than the full amount of the FEIE that I qualify for?

For example:

My income is $26,000. I choose to apply the FEIE to $20,000 and have $6,000 in taxable income. I then make a $6,000 contribution to my IRA.

If this works, please let me know the best way to do this in TurboTax Home & Business.

If it doesn't work, is there a different type of retirement account that I could use? My income is from a multimember LLC, so a SEP IRA would be an option.

Thanks for any help!

Re: With the Foreign Earned Income Exclusion can you choose to take less than the amount you qualify for?

Critter-3 — Sat, 17 Oct 2020 15:58:17 GMT

No you cannot choose ... either you take it all or not. And there are no other retirement options if you take the FEIE.

Re: With the Foreign Earned Income Exclusion can you choose to take less than the amount you qualify for?

LivingAbroad1 — Mon, 19 Oct 2020 09:03:32 GMT

Thanks for the reply @Critter-3 !

Ok. then I've got a few follow-up questions:

Can I amend my last 3 returns (I believe that's the maximum number of years I can go back) to revoke the FEIE? I only made an IRA contribution for 2019, so I assume after amended it would correct the problem and I wouldn't have to pay the 6% penalty.

I understand that once you revoke the FEIE you must wait 5 years before you have the option to claim it again. After amending the last 3 years, am I correct to assume that means I would then only have to wait 2 more years?

Thanks for your help, it's much appreciated!