Spousal Backdoor Roth while in MAGI phase out (Between 184k, 194k) while being subject to AMT.
Just finished my taxes. My wife doesn't work and our combined income is in the IRA deductible phase out range. I was planning on doing a 2016 IRA contribution for my wife and then convert to ROTH.
TurboTax gives me a puzzle. It says that a portion of the IRA can be tax deductible ($2400) and ask me how much of this amount I'd like to make non deductible.
I see 3 scenarios:
A) Make everything non deductible. Then convert to ROTH later on. No tax to pay for conversion. IRA basis back to 0 for subsequent year. This is classic backdoor ROTH.
B) Keep $2400 deductible and $3100 non deductible. This gives me a small tax deduction but also gives me a basis that will be taxable on next year backdoor ROTH.
C) Contribute $2400 directly to ROTH (Can I do it?). Contribute $3100 to IRA and perform backdoor ROTH.
Note: I expect my income to be higher next year but NOT subject to AMT. The cause of AMT is due to high tax deduction due to RRSP distribution.
Finally, it looks like AMT doesn't affect the tax these scenarios, but I need to play with the numbers some more.
Which of the above scenerios is the most tax efficient? Intuitively, they all look the same to me and A) is just simpler.
Does scenario B) move the tax owned to one year later?
Is C) the same as A) except the backdoor ROTH conversion is "partially already done"?
Anything I am missing?
Thanks!
