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greenjeehan
Level 2

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

I want to know if I can apply foreign tax credits to a portion (the same amount as the the excess IRA contribution) of my foreign earned wages while applying foreign earned income exclusion to the remaining foreign earned wages.
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DianeC958
Expert Alumni

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

Yes, you can apply the foreign exclusion to only part of your wages.  To have earned income to qualify to put money into an IRA, you must add back the excluded amounts in determining your compensation for purposes of the IRA limits.  Likewise, for purposes of determining the IRA limits, do not reduce your compensation by any foreign housing deductions.

 

Individual Retirement Accounts

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DianeC958
Expert Alumni

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

Yes, you can apply the foreign exclusion to only part of your wages.  To have earned income to qualify to put money into an IRA, you must add back the excluded amounts in determining your compensation for purposes of the IRA limits.  Likewise, for purposes of determining the IRA limits, do not reduce your compensation by any foreign housing deductions.

 

Individual Retirement Accounts

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**Mark the post that answers your question by clicking on "Mark as Best Answer"

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greenjeehan
Level 2

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

Thanks.

One more question.  If I apply foreign earned income exclusion just partly (even if I could apply it to full amount of my earned income), will I be barred from applying foreign earned income exclusion next year? 

KarenJ2
Expert Alumni

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

You should be fine.  There is no rule that you must exclude all of your foreign income.

 

 

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Amiller1
Level 2

I made excess IRA contribution due to zero earned income. Can I apply foreign earned income exclusion in part and foreign tax credits in part to my foreign earned wages?

I do you actually do this in TT?

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