Roth Conversion
If a taxpayer can’t contribute to a Roth IRA because of the income limitation, can he first contribute to a non-deductible IRA then convert it to a Roth withhin the same year? or is there a waiting period?
If a taxpayer can’t contribute to a Roth IRA because of the income limitation, can he first contribute to a non-deductible IRA then convert it to a Roth withhin the same year? or is there a waiting period?
Permalink Submitted by Joseph Arsenault on Fri, 2009-05-01 17:47
He can contribute to a Traditional IRA now (being deductible depends on income, filing status and participation in an employer sponsored plan).. Then in 2010 he can convert the Traditional IRA to a Roth IRA when the income limitation is lifted.. He will be able to pay his tax liability for that conversion 50% in 2011 and 50% in 2012 if he converts in 2010.
-J
Permalink Submitted by Alan Spross on Fri, 2009-05-01 22:57
In addition, starting in 2010, this taxpayer can make a non deductible TIRA contribution and convert it immediately. If he had no prior TIRA balance, the conversion would be totally tax free. This strategy could be continued indefinitely.
However, if he DID have a pre tax balance in his TIRA in the conversion year, the conversion would be partly taxable. Various scenarios exist if the two year tax deferral applies for 2010 conversions.