IRA Eligibility for Citizens of the Commonwealth of Puerto Rico?

[Guest David Hammond CISP]

Hi Everyone,

Can anyone advise on the availability and eligibilty of IRA's for Citizens of the Commonwealth of Puerto Rico?

Does it depend on whether earned income is from Puerto Rican sources or from mainland USA company sources?

Any insight into this matter will be appreciated.

The tax code for the Commonwealth of Puerto Rico and the mainland USA are different I am told.

Regards,

Dave H.

[Gary Lesser]

Possibly. For purposes of determining eligibility to make an Education IRA contribution, MAGI is an individual's adjusted gross income (AGI) from his or her federal income tax return with certain modifications. For most taxpayers, MAGI will be the same as AGI. The modifications made to AGI are slightly different for the Education IRA than those for the traditional IRA or the Roth IRA. For the Education IRA income limits, an individual's AGI must be increased by the following exclusions:

1. Foreign earned income of U.S. citizens or residents

living abroad;

2. Housing costs of U.S. citizens or residents living

abroad; and

3. Income from sources within

a. Puerto Rico

b. Guam

c. American Samoa, and

d. The Northern Mariana Islands.

[iRC § 530©(2); see also IRS Pub 970, Tax Benefits for Higher Education (Feb 1998).]

IMO, if personal service income is shown (not excluded)on Form 1040, then the compensation could be used as the basis for a traditional IRA contribution.[Edited by Gary Lesser on 09-14-2000 at 02:39 PM]