How Roth IRA Foreign Tax Credits Work for US Expats

If you're a US citizen living abroad and contributing to a Roth IRA, you might be wondering how foreign tax credits interact with your retirement account. In this episode, Lucas and Luna break down a little-known nuance: when you hold international stocks in a Roth IRA, you lose the ability to claim foreign tax credits on those dividends. They walk through a concrete example using a hypothetical $100,000 portfolio, explain the IRS Form 1116 trap, and offer practical asset-location strategies—like keeping international funds in a taxable account and US stocks in the Roth—to avoid double taxation. The episode also touches on recent 2025 IRS guidance clarifying that Roth IRA dividends paid by foreign corporations are still subject to the same sourcing rules. Perfect for expats, digital nomads, and anyone with overseas investments who wants to optimize their tax situation. #RothIRA #ForeignTaxCredit #USExpats #ExpatFinance #TaxOptimization #AssetLocation #InternationalStocks #DividendTax #Form1116 #DoubleTaxation #IRSGuidance #PortfolioStrategy #RetirementPlanning #Finance #PersonalFinance #FexingoBusiness #BusinessPodcast #TaxFreeGrowth Keep every episode free: buymeacoffee.com/fexingo