IRA investments while abroad - buying, not contributing

[thefriendlyatheist]

I relocated recently to the EU to work at my company’s headquarters. I’d like to stay a few years ~4-5 or so. I have existing IRA accounts where I trade options on individual tickers and index ETFs (spy/iwm/qqq/etc) and buy VOO with extra cash. With tax deferred accounts like IRAs, is it possible to continue trading index options and buying ETFs like VOO while living abroad? I don’t plan to contribute unless I can. I read about the PFIC, and wanted to make sure 1) if there’s anything I’m out of bounds with specifically for IRAs I’m active in and 2) if regular brokerage accounts have materially different rules.

Regarding state taxes:

I’m currently domiciled in California and plan to move my mailing address to an address in Nevada (not virtual mailbox). I will fly back to the states for business in 2023 and plan to get a Nevada ID/drivers license. I also will be updating my address with my brokerage and bank. Will this be sufficient to move my state residence? I don’t plan to spend more than a week in California, if I ever visit in the future. Thanks, and happy holidays!

 

[resjudicata]

@thefriendlyatheist We do this (well, both contribute and buy), have been abroad for almost 10 years now and buy within our IRAs. Our mailing address is my inlaws' house. We use a Google Voice number for 2FA.

 

[thefriendlyatheist]

@resjudicata Thanks for sharing

 

[jfebsd]

@resjudicata Do you take the Foreign Earned Income Exemption or the Foreign Tax Credit? Do you have US income? How are you able to contribute?

 

[stan783]

@jfebsd Anything you report under foreign earned income exclusion is ineligible for IRA contributions. I've understood the equation to be different should you opt for foreign tax credit but I'd need someone smarter than me to verify that.

 

[patriotpaladin]

@stan783 IRA contributions can't be more than the earned income on your tax return. The FEIE gets subtracted from that, so if all of your earned income is wiped out by the FEIE, your IRA contribution limit is $0.

If you use the FTC, your earned income doesn't get reduced, so you can contribute up to the normal contribution limit or your earned income, whichever is lower.

 

[resjudicata]

@jfebsd Foreign Tax Credit. No I don't have US income.

 

[jfebsd]

@resjudicata Thanks. I'm in a low tax country, so I choose FEIE, but I do miss out on on contributing.

 

[teofan]

@jfebsd Do any US brokers actually let you make contributions? I’m pretty sure the big three don’t.

 

[resjudicata]

@teofan I use Vanguard and my husband uses Schwab for our Roth IRAs, we haven't had any issues yet anyway. We are contributing from an American bank account, have given them an American address, have an American phone number for 2FA. The only thing that shows we are abroad is our IP address, we don't use a VPN, but hasn't been an issue yet.

 

[savedbyreality]

@resjudicata are they somehow able to tell if contribution is from income from abroad? for example if i send foreign income to my american bank account, then use that to contribute ?

i was thinking if my american based W2/1099s's dont add up to the amount I contribute - if that's a problem

similar to the issue of not being allowed to contribute 'foreign income' to Roth IRA i think? but not sure how they can tell where the money was earned

 

[resjudicata]

@savedbyreality We have no W2s or American income at all and contribute.

 

[genenco]

@thefriendlyatheist US ETFs are generally not available to EU traders since they lack the required disclosures. You can buy options in them then exercise them. You can also just…not tell your brokerage you’re in the EU. Personally I don’t feel comfortable doing that long term with significant amounts, but for several years I might roll the dice if we’re talking like five figures. Not like you’d lose the money if you get caught. Worst case you’ll need to transfer it all on short notice.

 

[thefriendlyatheist]

@genenco Thanks! Interesting that I can buy the etf options to exercise but can’t buy shares. That seems kind of odd to me. I guess I could sell puts, and it’s all good if assigned? I have upwards of 6 figures in them so I do want to be as mindful as possible. If they forced me to close the IRA, I’d take the hit for early withdrawal?