Can You Contribute to an IRA from the Netherlands?

This is not tax advice. Consult a qualified tax professional for your specific situation.

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One of the most frustrating surprises for Americans living in the Netherlands is discovering that their favorite retirement account might be off-limits. If you're a Dutch-American Friendship Treaty (DAFT) entrepreneur using FEIE, contributing to an IRA gets complicated fast.

Here's what we've learned about IRA contributions from abroad.

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The Basic Rule

To contribute to an IRA (traditional or Roth), you need earned income that's not excluded by the Foreign Earned Income Exclusion (FEIE).

That's the catch. Most DAFT entrepreneurs use FEIE to exclude their foreign earnings from US income tax. If you exclude all your income, your eligible compensation for IRA purposes drops to zero.

No eligible compensation = no IRA contribution.

For more context on how FEIE works, see our complete US taxes guide.

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Traditional IRA Rules for Expats

Can you contribute? Only if you have earned income that exceeds your FEIE exclusion.

2025 FEIE exclusion: Approximately $130,000

If your income is below the FEIE limit: You've likely excluded everything. No traditional IRA contribution allowed.

If your income exceeds the FEIE limit: The amount above the exclusion counts as eligible compensation. You can contribute up to $7,000 (or $8,000 if you're 50+) or your non-excluded income, whichever is less.

Example: You earn $150,000 and exclude $130,000 with FEIE. Your non-excluded income is $20,000. You can contribute up to $7,000 to a traditional IRA.

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Roth IRA Rules for Expats

Roth IRAs have the same earned income requirement plus an additional wrinkle: income limits.

Can you contribute? Only if:

1. You have earned income not excluded by FEIE, AND
2. Your Modified Adjusted Gross Income (MAGI) is below the Roth limits

2025 Roth IRA income limits:

• Single: Phase-out begins at ~$150,000
• Married filing jointly: Phase-out begins at ~$236,000

Since most DAFT entrepreneurs exclude most or all of their income with FEIE, the MAGI is often very low. If you have non-excluded income, you might actually fall within the Roth limits.

But again, you need that non-excluded earned income to contribute.

What We Wish We Knew: We assumed we could keep contributing to our Roth IRAs from abroad. We couldn't. Our accountant caught it before we made an excess contribution, which would have triggered a 6% penalty per year until corrected.

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The Foreign Tax Credit Alternative

Here's where it gets interesting. If you use the Foreign Tax Credit (FTC) instead of FEIE, your income isn't excluded. It's included in your US return, and you take a credit for Dutch taxes paid.

With FTC:

• Your earned income is fully reported
• You have eligible compensation for IRA contributions
• You can contribute to traditional and Roth IRAs (subject to normal limits)

The trade-off: FTC might result in higher overall taxes depending on your situation. Dutch tax rates are comparable to or higher than US rates, so FTC often works out okay. But it's not always better than FEIE.

This is a decision to make with your tax accountant, not on a blog post. The math depends on your specific income, deductions, and filing status. If you are unfamiliar with FEIE, read our FEIE guide first.

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What About Existing IRAs?

Good news: Your existing IRA accounts are completely unaffected by your move. They stay where they are and continue growing.

Traditional IRA: Grows tax-deferred. You'll pay taxes on withdrawals in retirement.

Roth IRA: Grows tax-free. Qualified withdrawals in retirement are tax-free.

You can still:

• Manage and rebalance your investments
• Make investment changes within the account
• Take distributions (though early withdrawal penalties may apply)

You cannot:

• Contribute if you have no eligible earned income
• Open new IRA accounts at some brokerages (some restrict foreign addresses)

Pro Tip: Make sure your brokerage has a US address on file. Some firms, including Vanguard, have restrictions on accounts with foreign addresses. A family member's address works.

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Backdoor Roth: Does It Work from Abroad?

The backdoor Roth strategy (contribute to a traditional IRA, then convert to Roth) has the same earned income requirement for the initial contribution.

If you can't contribute to a traditional IRA because you have no eligible earned income, the backdoor Roth doesn't help. The contribution step still requires earned income.

If you can contribute (because you use FTC or have non-excluded income), the backdoor Roth conversion step works the same as it does domestically.

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What We Do Instead

Since we use FEIE and can't contribute to IRAs, we focus on other wealth-building strategies:

Taxable brokerage account: Low-cost index funds (we use VTSAX and VTIAX). We put $2,000-3,000 per month into these. No contribution limits, and you can withdraw anytime. Less tax-efficient than an IRA, but better than not investing at all.

Existing retirement accounts: Our old 401(k) accounts and Roth IRAs continue growing. We just cannot add to them. At a 7% average return, those existing balances compound significantly over decades. For more on 401(k) management from abroad, see our 401(k) guide for expats.

Dutch pension options: Self-employed people in the Netherlands have some pension deduction options (jaarruimte/reserveringsruimte). These are complex but worth exploring with your Dutch tax advisor.

Business growth: Building business equity is itself a form of wealth accumulation.

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Common Questions

Can my spouse contribute if they have US income? If your spouse has US-source earned income that isn't excluded by FEIE (for example, they work remotely for a US employer), they may be able to contribute. Each spouse's situation is evaluated independently.

What if I accidentally contributed? Remove the excess contribution before your tax filing deadline (including extensions) to avoid the 6% annual penalty. Contact your brokerage to process an "excess contribution removal."

Should I switch from FEIE to FTC just to contribute to an IRA? Probably not. The math usually does not work in your favor. Giving up FEIE would cost roughly $8,000-12,000 per year in extra US taxes. The IRA tax benefit is about $1,500 per year. Keep FEIE and invest the tax savings in a taxable account instead. But run the numbers with your accountant for your specific situation.

Are my existing IRA funds at risk? No. Your existing balances are completely safe. Moving abroad doesn't affect money already in the account.

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Roth Conversion Strategy

Here is one strategy worth considering. If you have an existing traditional IRA, you can convert it to a Roth while abroad.

Since your taxable income is low (FEIE excludes your earned income), you can convert traditional IRA funds to Roth at a low or zero tax rate. For example, you could convert roughly $27,700 (the married standard deduction amount) per year and owe $0 in taxes on the conversion.

Over several years, you can move your entire traditional IRA to Roth. All future growth becomes tax-free.

This is advanced territory -- talk to an accountant before doing this. Learn more about when you need an expat tax accountant.

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The Bottom Line

Most DAFT entrepreneurs using FEIE cannot contribute to IRAs while living abroad. Your existing IRAs are safe and continue growing, but new contributions require eligible earned income that hasn't been excluded.

If IRA contributions are important to you, discuss the FEIE vs Foreign Tax Credit decision with your tax accountant. The FTC route preserves IRA eligibility but may have other tax implications.

Either way, not being able to contribute to an IRA is not the end of the world. There are other ways to build wealth, and your existing retirement accounts keep working for you.

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We're not immigration lawyers or tax advisors -- just Americans who did this. Requirements change, so verify with official sources.