Spouse impact on conversion
My spouse and I both have TIRAs with mixed deductable/nondeductable contributions. However, his percentage of nondeductable is much lower than mine (therefore more of the conversion is taxable). Can we convert my TIRA without regard to his accounts? Also, just so I’m figuring this correctly: I’m using the basis as reported on the 8606. The difference between that and the total balance of all my TIRAs sets the percentage of the coversion which is taxable–correct?
Permalink Submitted by Alan Spross on Sun, 2009-12-27 18:07
Once the income limits for conversions disappears next week, anyone can convert irrespective of what their spouse does with those IRAs. Each 8606 is independent, therefore you would normally want to convert your TIRAs first because of the higher % of basis. That means that more dollars get into your Roth IRA per dollar of the tax bill due on your conversion vrs if he were to convert. Of course, you both could convert different amounts using each respective 8606. For example a very small conversion of his IRA would start the 5 year clock in motion if he has no prior Roth accounts.
For the taxable percentage of your conversion, just follow Part I of the Form and the instructions. The total balance is that of all your TIRA, SEP IRA and SIMPLE IRAs as of the year end for the conversion year adjusted upward for the conversions you did or distributions you took. The form will also generate a figure for your remaining basis left over for use in later distributions or conversions.
Permalink Submitted by Katherine Tucker on Mon, 2009-12-28 00:40
Thanks for the quick reply.