Effect of Roth conversion on current year Roth contribution
Converting my traditional IRA to a Roth IRA in 2010 will generate a significant increase to my adjusted gross income (AGI). The additional income from this conversion will be the sole reason why I am pushed above the 2010 limit ($177,000?) above which I seem to become ineligible to make a new contribution to my Roth. Question: Does the conversion count towards the income limit of above which I cannot make a current year new contribnution to a Roth?
Permalink Submitted by mk foss on Wed, 2010-11-03 16:30
A conversion is not part of Modified Adjusted Gross Income for a Roth contribution. An IRA RMD also is not part of MAGI. Without those items, you should be able to make a Roth contribution.
Permalink Submitted by Douglas Broome on Wed, 2010-11-03 16:47
Thank you. Interesting. I also telephoned the IRS and posed the same question. The IRS person was clear is saying just the opposite, that the conversion amout wil become part of the modified AGI and will put me over the Roth limit for 2010 therefore prohibiting me from making a a Roth contribution for myself or my wife. FYI, I am still working and have a 401k at work, but my wife is retired at home. I am wanting to make 2010 contributions for both of us.
Permalink Submitted by Alan Spross on Wed, 2010-11-03 23:09
The IRS advice is incorrect. Per Page 58 of Pub 590, the modified AGI for regular Roth contributions requires the subtraction of conversion income from the tax return AGI figure. This applies to TIRA conversions as well as direct conversions from qualified plans.
But note that there are also some additions that you must add to your tax return AGI to get the correct MAGI figure. There are also listed on p 58.