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Topic: Traditional IRA contribution -- deductible on UK return?  (Read 250 times)

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Traditional IRA contribution -- deductible on UK return?
« on: November 08, 2020, 10:55:47 PM »
I read that you can make a traditional IRA contribution and deduct it on both your US and UK tax returns. I'm a higher rate 40% taxpayer. Does this mean that if I contribute $6000 to the IRA and deduct it on my self-assessment, I can get a refund of $2400 (£1855) from HMRC?

How do you deduct the IRA contribution on your self-assessment? Is the guidance here under "Double Taxation Relief" applicable? newcomer link: https://www.gov.uk/guidance/overseas-pensions-tax-relief-on-your-contributions [nonactive] Which article in the treaty should be cited?
« Last Edit: November 08, 2020, 10:57:57 PM by Calliope »


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Re: Traditional IRA contribution -- deductible on UK return?
« Reply #1 on: November 08, 2020, 11:40:05 PM »
Where are you living and where does your earned income come from? Are you a UK and/or US citizen?
Dual USC/UKC living in the UK since May 2016


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Re: Traditional IRA contribution -- deductible on UK return?
« Reply #2 on: November 09, 2020, 03:01:38 PM »
I'm a US citizen living and working in the UK. All of my earned income is from the UK.

I have a traditional IRA that I was contributing to before I moved to the UK. I haven't contributed to it since I moved here. I'm aware that it's more beneficial to contribute to a Roth IRA, but this year my income will be too high to be able to contribute to a Roth.


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Re: Traditional IRA contribution -- deductible on UK return?
« Reply #3 on: November 09, 2020, 03:18:56 PM »
I'm a US citizen living and working in the UK. All of my earned income is from the UK.

I have a traditional IRA that I was contributing to before I moved to the UK. I haven't contributed to it since I moved here. I'm aware that it's more beneficial to contribute to a Roth IRA, but this year my income will be too high to be able to contribute to a Roth.

I don't know the answer but would like to find out. I am retired with no earned income but my son is in a similar position, a USC living and working in the UK.  His only earned income is in the UK but he pays no taxes. Line 1 on his 1040 shows his earned income but line 21 on schedule 1 has the exact amount so line 6, total income is zero.

If IRA contributions are allowed on foreign earned income but not if it is zero'ed out, could he make contributions if, instead of using FEIE, he used Foreign tax credits to zero out his US taxes?
Dual USC/UKC living in the UK since May 2016


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Re: Traditional IRA contribution -- deductible on UK return?
« Reply #4 on: November 09, 2020, 03:33:23 PM »
You can use foreign earned income to contribute to an IRA, but it can't be excluded under FEIE. Your son can use FTCs instead of FEIE to contribute. Or he can use both, if he has income above the FEIE limit or certain types of income that can't be excluded under FEIE.

I only learned recently that a traditional IRA contribution can be deducted on a UK return, so I was hoping someone here would know how to handle that on the self-assessment.


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Re: Traditional IRA contribution -- deductible on UK return?
« Reply #5 on: November 09, 2020, 03:44:46 PM »
Thanks for that info. I’ll let my son know about that option.

Sorry I can’t help about HMRC SA.
Dual USC/UKC living in the UK since May 2016


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