Permalink Submitted by Alan Spross on Wed, 2009-11-04 18:51
Not if it is tax free. If the Roth is qualified, all distributions are tax free, but if the Roth is not qualified and earnings are distributed, the taxable income from the earnings could contribute the MAGI being higher than the year’s AMT exemption.
The Roth conversion itself is fully taxable, and would also serve to expose the entire income to AMT calculations. But withdrawals of converted funds from the Roth after a conversion are not taxable, but are subject to a 5 year holding period to avoid early withdrawal. On exception to the withdrawal of conversion dollars occurs for 2010 conversion when the taxes are deferred for two years. Prior to 2012 and withdrawal of conversions will accelerate the income reporting into the year of withdrawal, and that could trigger AMT considerations.
Permalink Submitted by Alan Spross on Wed, 2009-11-04 18:51
Not if it is tax free. If the Roth is qualified, all distributions are tax free, but if the Roth is not qualified and earnings are distributed, the taxable income from the earnings could contribute the MAGI being higher than the year’s AMT exemption.
The Roth conversion itself is fully taxable, and would also serve to expose the entire income to AMT calculations. But withdrawals of converted funds from the Roth after a conversion are not taxable, but are subject to a 5 year holding period to avoid early withdrawal. On exception to the withdrawal of conversion dollars occurs for 2010 conversion when the taxes are deferred for two years. Prior to 2012 and withdrawal of conversions will accelerate the income reporting into the year of withdrawal, and that could trigger AMT considerations.