3.8% Surtax-Applicable to Roth Conversion?

Submitted by Seth Poppel on Thu, 2014-01-02 12:57

1.) I have converted my TIRA to a Roth in 2013 and will file October 15, 2014. Will the 3.8% Surtax apply to the amount of my Roth conversion?

2.) I have a large capital loss carry-forward. I am assuming that this is NOT deductible against the Roth Conversion amount alluded to above?

Thank you.

Permalink Submitted by Alan - IRA critic on Thu, 2014-01-02 15:33

1) The Roth conversion is not considered investment income for the surtax purposes. However, the conversion will increase your total income and your increased MAGI could exceed the threshold thereby exposing your investment income to the surtax.
2) The portion of your carryover is limited to only 3,000 (1,500 if filing married separately) applied against your ordinary income after offsetting any cap gains. It would reduce your conversion income by that amount.
By filing an extension by 4/15 you have the option of recharacterizing all or part of the conversion until 10/15/2014.