Savers credit and Roth Conversion
Taxpayer is making a traditional IRA contribution for 2021 in order to reduce AGI and be eligible for the Savers Credit. Will a subsequent Roth Conversion invalidate the Savers Credit in any way? Do Roth Conversion prevent subsequent year’s Savers Credits?
Thank you
Permalink Submitted by David Mertz on Mon, 2022-04-04 00:21
The Roth conversion in 2022 will have no effect on the deduction or Saver’s Credit for 2021 because it’s 2022 income. It *will* add to 2022 AGI which could affect the amount of a 2022 Saver’s Credit depending on where AGI falls relative to the different AGI tiers for this credit.
Permalink Submitted by Alan - IRA critic on Mon, 2022-04-04 02:04
Also note that while a distribution from the IRA during the testing period will normally trigger a reduction of eligible savers credit contributions for the testing period, an exception applies to distributions from any plan that are rolled into a Roth account. This is explained in the line 4 instructions on Form 8880.
Permalink Submitted by JEFFREY MACK on Mon, 2022-04-04 18:40
Thanks for your replies