RMD then Roth Conversion
We know that if an IRA is subject to RMDs, the RMDs must be taken before a Roth conversion can be made. However, consider the following scenario:
Client has a $100,000 Trad IRA RMD for 2025
We know we want to do a $50k Roth conversion from this IRA later in the year
On the full $150k, we want to withhold 15% for federal taxes and 5% for state for a total of $30k in taxes.
Can we:
Execute the $100k RMD and instead of withholding a total of 20%, we withhold 30% for taxes. In our minds, the additional 10% withheld from RMD is going to cover the $10k in taxes attributable to the upcoming Roth conversion
Once the $100k RMD has been satisfied, we execute the $50k Roth conversion and do not withhold any taxes. The tax burden was already met by the additional taxes withheld from the RMD and we can then convert the full $50k to Roth
I do not see why this would not work, but want to be sure we are not missing something obvious.
Permalink Submitted by Alan - IRA critic on Tue, 2025-09-30 11:28
That works fine. In addition, withholding from the conversion distribution would reduce the amount actually converted.
IRA custodians generally support federal withholding up to 99% of the amount distributed, but some will not withhold for state taxes unless the state requires it.