{ "media_type": "text", "post_content": "401k tax question:\nMarried US Citizen currently working abroad. I will be returning to the US in 2 months. However, prior to returning I would like to max out my tax advantage. Cont.", "post_id": "5dd351df36febe0021aeef0b", "reply_count": 11, "vote_count": 0, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

401k tax question: Married US Citizen currently working abroad. I will be returning to the US in 2 months. However, prior to returning I would like to max out my tax advantage. Cont.

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I see what you are saying now. Yes, technically it will be deemed taxable on your return but if your taxable income is 0 and you have no personal outside income you can claim up to the deduction amount (24,400) as tax free! Sorry I missed your main point there!

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I have read that it is possible to convert your 401k to roth tax-free as your income abroad is excluded in the FEIE. I have 70K in my 401K currently. Can I convert all of that to roth tax-free prior to moving back home as I am under the income limit?

It depends on if the contributions of the 401k was done while you were overseas or in the US. If while in the US then it would be considered US source income and wouldn’t be eligible for the FEIE. The one thing you can do is use your standard/itemized deduction against the income if you don’t have too much personal income.

Pretty sure the interest from the 401k would just be part of the rollover. If you have higher itemized deduction then you should be able to use the full amount to covert the 401k and you have to do it within the tax year.

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What exactly are you thinking you will get by converting to Roth IRA? The FEIE works based on time spent over seas, if you were working overseas whole year (BFR Or PPT) then you can get the full exclusion ~ 107k for 2019. Your 401k will only come off your taxable earnings on W2 and you can only deduct current year contributions , for 2019 believe 19k plus 6k if over age limit. Don’t forget about tax credit as well what country are you in? Most countries the foreign tax credit will be enough due to higher tax rate.

I was told the following by someone : The FEIE, as the middle two letters in the name imply, only applies to *earned income*. Roth conversions are not earned income and cannot be excluded. What you can do is, if all of your income is excluded under the FEIE, is convert the amount up to the standard deduction, because that will be tax-free. Beyond that you'll be taxed at your marginal tax rate (based on the FEIE-excluded income being included). I just wanted to verify with other individuals to see if anyone had done this

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