Roth Conversion
In February I converted an entire contributory IRA ($80,000) to a Roth. I intend to claim the conversion on my 2011 and 2012 tax returns as allowed. I also have a rollover IRA with about $300,000 in it. Could I convert $40,000 from that IRA to a Roth now and claim that $40,000 as 2010 income and pay the full tax due this year on that amount? Also, if that is possible, should I open a different Roth for that conversion or could I put it in the existing one? Thanks.
Permalink Submitted by Alan Spross on Fri, 2010-10-29 23:35
You must make the same election of taxable years on all your Roth conversions in 2010. Either all the converted dollars are deferred to 2011 and 2012, or you must opt out of the deferral and report the total amount in 2010. If you want to use your marginal tax bracket in all 3 years, then you need to convert and report a year at a time and not use the 2010 special rules.
If you are married and your spouse has accounts to convert, the spouse can make a different election than you do. For example, the spouse could convert 40,000 and opt to report it in 2010 and you would convert 80,000 and defer 40k each to 2011 and 2012. That way, the brackets in all 3 years are used.