Author Topic: Backdoor Roth - Married Filing Status Question  (Read 325 times)

beattie228

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Backdoor Roth - Married Filing Status Question
« on: July 19, 2018, 08:39:57 AM »
Good morning all. Here's the scenario leading to my question:

Married as of this year so unsure if we should file as Married Filing Joint or Married Filing Single when tax season comes up. From what I read, MFJ has more tax breaks although we don't have children and we don't have student loan interest to declare so unsure just how much tax breaks will make a difference. The wife has an old traditional IRA with about 30k in it. I do not have an old tIRA so the conversion from tIRA to rIRA is really straightforward for me.

I planned to run a few different scenarios once tax forms are released, but wanted to gain some insight from the MMM community.

TL;DR: Does the wife's old traditional IRA create an issue for me tax-wise when I convert the $5,500 in my tIRA to rIRA? If so, should we file MFS to take advantage of the backdoor Roth for myself? 

Greenstache

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Re: Backdoor Roth - Married Filing Status Question
« Reply #1 on: July 19, 2018, 09:09:15 AM »
Worth running both ways to be sure, but most of the time MFJ will be to your advantage.

IRAs are held by individuals, never by a couple.  So each of your IRA accounts follows the person it belongs to, and filing status has no impact at all on this.

terran

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Re: Backdoor Roth - Married Filing Status Question
« Reply #2 on: July 19, 2018, 09:10:12 AM »
Married filing jointly is almost always the right answer. One of the few times it makes sense to file married filing separately is if one spouse has lower income than the other and is on some income based student loan repayment plan with the possibility of student loan forgiveness in the future. They'll still pay higher taxes between the two of them, but it can make sense if it means they pay less on student loans that will later be forgiven.

IRA are individual accounts. The fact that she has an existing traditional IRA will not cause issues with your backdoor Roth regardless of whether you file MFJ or MFS. Her existing traditional IRA will cause issues if she does a backdoor Roth unless she can roll it into an employer plan.