ROTH CONVERSION / TAX REBATE
Hi, Can you please advise if a Roth conversion is counted as income
in the year you convert ? The question is asked to see if you would qualify
for the proposed tax rebate. ($150,000 joint) I understand taxes must be paid on the conversion, but if it counts toward the $150000 limit you would then not qualify for the tax rebate.
Thanks
Permalink Submitted by Al Fry on Sat, 2008-02-02 18:22
I don’t believe the conferees have yet settled on a final bill.
Permalink Submitted by Alan Spross on Sat, 2008-02-02 18:34
Al is correct, but you can be pretty sure that the conversion income will count in whatever AGI figure they arrive at. Current proposals will use 2007 AGI which will include conversions reportable in 2007.
Of course, if you happen to end up in a rebate phaseout situation, you could always recharacterize the part of the conversion needed to retroactively adjust your income. You will have until the extended due date to do that. From a practical standpoint however, unless you have taken investment losses in the Roth, the rebate amount itself will probably not be enough to make recharacterization worthwhile.