$12,000 traditional IRA contributions brings us down to 12% bracket.

[FIREball567]

MFJ - Our adjusted gross income is in the 22% bracket. After the $12,000 traditional IRA contributions, we're now in the 12% bracket. Are we better off recharacterizing the entire $12,000 to roth?

[terran]

Traditional vs Roth depends entirely on expected marginal rate in retirement. If you expect to have a higher marginal rate than 12% and lower than 22% then you should recharacterize the amount that puts you right on the line between the 12% and 22% brackets. Remember to consider current vs future state taxes and ACA subsidies.

[AerynLee]

What Terran said.

And it's not all one or the other. We needed $2k in Traditional to get into the 12% bracket so I did that, then put the remaining $10k in ROTHs

[FIREball567]

Traditional vs Roth depends entirely on expected marginal rate in retirement. If you expect to have a higher marginal rate than 12% and lower than 22% then you should recharacterize the amount that puts you right on the line between the 12% and 22% brackets. Remember to consider current vs future state taxes and ACA subsidies.

Thanks terran. I need to do the math and figure this out.

[FIREball567]

What Terran said.

And it's not all one or the other. We needed $2k in Traditional to get into the 12% bracket so I did that, then put the remaining $10k in ROTHs

That's the part I'm confused about. I always thought tax bracket percentages were before the standard deduction. Right now, my adjusted gross income is in the 22% bracket. After the $24,400 standard deduction, it brings it down to the 12%. I played around with TurboTax and pretended to recharacterize the $12,000 to roth. I was still in the 12% bracket.

[AerynLee]

No, tax brackets are from your taxable income which is your AGI minus your standard deduction (or itemized deductions if you can do that)