Tax help for Expat

[jmd247]

HI guys,
My wife and I serve with an NGO in Cambodia. We are technically still residents of CA. We pay almost no federal income tax because we make about 40k a year but after the deduction and housing allowance we dont really have any income to be taxed on. However I am payed via a 1099 so we DO have to pay self employment taxes. They are the worst!

My question is this: I am struggling to find how with my current situation with already not paying any income taxes, using a IRA or solo 401k or 403b (have access to this), is more beneficial than the RothIRA. The reason is because putting money into any of these does not reduce my self employment taxes right, and these are really the only taxes I pay. Trying to look into an HSA as well but having a hard Time finding if I can being international.

Any word of advice on how to proceed?

[gocurrycracker]

If your tax rate is 0%, then Roth solo 401k, Roth 403b, Roth IRA are all good choices.

Correct, they don't save any SE taxes.

You need a qualifying health plan in the US to open an HSA. But with a 0% tax rate, I wouldn't contribute to an HSA.

[jmd247]

Okay great. I have another question @gocurrycracker.

Since we technically can take the foreign earned income exclusion, from what I am reading we shouldn't? This will make it so we cannot contribute to our Roth IRA's correct? We make about 40-55k a year. I am a little confused about the rules with FEIE and IRA's both Roth and Traditional.

[gocurrycracker]

Correct, any income excluded with the FEIE cannot also be contributed to an IRA (but can be contributed to a Roth 401k/403b)

If you are paying zero income tax, the FEIE won't save you any taxes. It definitely won't save any self-employment taxes.


If you have any Traditional IRAs from previous years, using the FEIE might enable the option of a tax-free Roth conversion because you can use the FEIE in addition to the standard deduction.

[jmd247]

Is there a preference over Roth IRA over Roth solo 401k?

Also do you have a Roth solo 401k reccomendation? I’m having trouble finding a Roth option.

[gocurrycracker]

Etrade and Vanguard offer solo 401ks with Roth options

The maximum contribution amount for solo401k is greater than for an IRA. If you want to contribute more than what is legally allowed for an IRA than a solo401k is an option.