how do you calculate eligibility to covert IRAs to ROTH IRA
When determining eligibility for converting from an IRA to a ROTH IRA…
my husband is 70 years old and I am 65 years old. part of our income this year was distributions from my IRA and his SEP. How are these deductions treated when calculating our eligibility to convert our IRAs to a ROTH IRA.
we also receive social security benefits. how is this income treated when calculating our eligibility to convert our IRAs to a ROTH IRAs.
last question….we have some long term losses….is there any way to use these to offset any income taxes due when converting from an IRA to a ROTH IRA
Permalink Submitted by Alan Spross on Mon, 2008-11-17 22:35
The bottom line is that you need to be sure that your modified AGI as described on p 60 of Pub 590 does not exceed 100,000.
Included in the calculation are retirement plan distributions, but NOT the portion that represents RMDs. If your husband turns 70.5 before the end of the year, and distribution he takes is considered applied to his RMD for the year, and therefore would not count toward the 100,000 limit.
The portion of your SS benefits that are included in your AGI do count. If your AGI is near 100,000, then 85% of your gross SS benefit would be included in your AGI.
Capital losses, whether ST or LT are used to offset any gains, and any excess can reduce your AGI by a maximum of 3,000. Therefore, realizing losses can reduce your AGI mainly by offsetting gains and also the additional 3,000.
It is best to make the effort to determine if you are eligible to convert before doing so, but if you cannot tell, you can always recharacterize the conversion if you have to. But if you wait until after year end, it will be too late to convert for 2008. Fortuneately, the last year that the 100,000 income limit will apply will be 2009.