IRA to Roth IRA
With the steep market decline this may be a good opportunity to convert TIRA funds to a Roth IRA. I realize that the converted amount does not affect the MAGI for eligibility to convert. However, does the converted amount, assuming a substantial conversion, affect your tax bracket? I feel the answer is “yes,” but I am hoping otherwise.
Thank you.
Permalink Submitted by Alan Spross on Thu, 2008-11-13 23:31
Yes, it would. That is why it is frequently recommended to do smaller conversions each year so that the next higher tax bracket is avoided.
Even a small conversion could inflate your bracket if you are already at the top of your present bracket for the year. Therefore, WHERE you fall in your present bracket is a material consideration.
This is also why some people convert a high amount with the idea of recharacterizing the exact amount next year to bring them down to the top of their original bracket after their exact tax bill is known.
Permalink Submitted by Janine Janine on Fri, 2008-11-14 18:46
Alan….Thank you very much for your prompt reply. As a result of your information, I checked and even a modest amount converted to a Roth could escalate me to the next tax bracket. And recharacterization with the concomitant paper work and deadlines does not appeal to me.
Thank you again!