SEP IRA’s & Roth Conversions
We have a doctor ( age 39 ) who makes over $ 500,000.00 per year. He has over $400,000.00 in a SEP IRA making annual contributions of over $ 45,000.00. He called wanting to open up a ” Non-Deductible ” IRA with the intent of doing a Roth Conversion soon after. He has no Traditional IRA’s, but, does will having the SEP IRA pose any restrictions?
Permalink Submitted by Alan - IRA critic on Tue, 2015-07-14 19:44
He can make the non deductible TIRA contribution to a separate IRA account or as a non SEP contribution to the SEP IRA account. However, either way the large SEP IRA balance will result in the conversion being nearly 100% taxable. If he maintained a solo 401k (if eligible) instead of the SEP IRA, then his non deductible contribution could be converted tax free because there would be no other non Roth IRA value to include on the Form 8606 conversion calculation.