ROTH conversion for 2018
Thank you for the opportunity to submit my question. I am 67 1/2 years, income is from social security, dividends from IRA’s and contract work, with income of $4700. I will need to pay taxes on the $4700.
I sold my townhouse in October 2018 and bought a villa December 2018.
Investments-ROTH, 403b, IRA (1) and IRA (2), all with the same brokerage. IRA (2) funded in 2014 from frozen pension plan. Investments in ROTH and both IRA’s are dividend stocks. I want to do a series of ROTH conversions starting 2018, 2019 and 2020. RMD’s start in 2021. I want to stay withing the 12% tax bracket for 2018 taxes so as not to affect my Social Security and Medicare. How do I calculate the amount I can convert and still stay within the 12% tax bracket for 2018 taxes?
Permalink Submitted by Alan - IRA critic on Thu, 2018-12-06 03:56
If you want to do this yourself, you will probably need to purchase a tax program or google one of the free on line tax calculators and enter different amounts into the programs to see where the marginal rate changes. Any conversion will probably increase the amount of your SS included in your AGI until the max 85% of SS is included. If you stay within the 12% bracket you will be far short if IRMAA surcharges unless you have huge itemized deductions. You may find that your marginal rate actually declines once all 85% of your SS is included because each dollar of other income (including your conversions) drags 85 cents of SS into your AGI. As the SS is being dragged into your AGI, your effective marginal rate is 22.2 (1.85 X 12%), but then drops back to 12% after 85% of SS income has been included. If your dividend stocks are in retirement plans, the dividends are not taxable, but if you take distributions of the dividends from the plan they will increase your AGI and taxable income.