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by BBCWatcher » Tue, 12 Apr 2016 3:18 pm
Some more caveats/cautions:
1. If your earned income is fully shielded from U.S. taxability via the Foreign Housing Exclusion and/or Foreign Housing Exclusion, you will not be eligible to make U.S. Individual Retirement Account (IRA) contributions, such as a Roth IRA.
There are a couple ways you can work around this problem. One way is to have enough U.S. earned income to qualify for a contribution (or for your spouse, since a spouse can make an IRA contribution for you). For example, at US$40,000 per year of steady earned income if you spend 2 months per year working in the United States then you should hit at least US$5,500 of U.S. earned income and could make a US$5,500 IRA contribution. So suppose you plan your stint in Singapore so that you leave on March 1, 2017. January and February are U.S. earned income months, so you can make a 2017 IRA contribution based on that income (due by April 15, 2018). You stay in Singapore (with a couple short trips to the U.S. to keep your green card alive) until the end of October, 2018. For the period March, 2017, through October, 2018, you can take advantage of the Foreign Earned Income Exclusion. Then November and December, 2018, give you enough U.S. earned income to make an IRA contribution for 2018 (due by April 15, 2019).
2. The same is true for U.S. 401(k) contributions if you participate. It's best to "max out" your 401(k) contributions in those U.S. months. Or, if your employer allows it, continue making 401(k) contributions even while working in Singapore. (That is allowed, actually, as long as you're still on your U.S. employer's payroll -- although you should adjust your tax withholding during your time in Singapore.)
3. On the other hand, if you're working for a Singapore-based employer, you won't have to make U.S. Social Security and Medicare contributions. But the downside is that you also won't earn Social Security and Medicare credits if you're not contributing. Spend too long off Social Security and you'll lose your Social Security Disability insurance coverage, too. At least be aware of those dynamics. If you can arrange the overseas work schedule as per the example #1 then Social Security and Medicare can work very well, too. You'd end up putting 2017 and 2018 into your earnings history as lower income (and lower taxed) but still decent years, and that'd be really nice.
4. There are certain tax credits that you lose if you don't have unexcluded income. The Child Tax Credit is a notable example. Again, the "ideal" work schedule suggested in #1 above helps there, too, if applicable.