Tax-Free Roth Conversions ?
A few recent posts seem to suggest that a Roth conversion would be tax free IF after doing so, their Traditional IRA was emptied and left with a zero balance. I have been systematically converting my TIRA to Roth each year since retiring as long as I keep our income less than my self-declared max .. within tax bracket. I’d be very much interested in how I might be able to convert tax free .. is there a light at the end of this tunnel when the TIRA is empty – should I go ahead and exceed my income limit in order to empty the TIRA sooner ? Sincerely appreciate your input.
Permalink Submitted by Alan - IRA critic on Sun, 2021-05-23 00:15
A conversion is only tax free if your IRA basis from non deductible contributions can be applied to the entire amount converted as calculated on Form 8606. In your case, it sounds like your TIRA is entirely pre tax and you have no IRA basis and that would result in a fully taxable conversion. The posts you are reading are likely referring to the so called “back door Roth” in which a taxpayer without a pre tax IRA balance makes a non deductible contribution and then converts it right away before any earnings are generated. That sort of conversion would be tax free.