Got married, lost my IRA?

[merlin7676]

I have a traditional IRA that I've had for years and planned on maxing this year.    Made some contributions last year but not a bunch since working on getting out of debt.   Got married in November.
Tax prep guy emailed yesterday and said that I can't deduct the contributions I made last year since I got married as we're now above the IRA threshold. He said I need to convert my IRA into a Roth.
But if the husband and I stay on track we'll hit the Roth threshold in a few years too (I think...see below).
If I convert, then I have to pay taxes on all of it which I currently don't have any means to do.
At this point is it best to just stop the IRA, max the 401K instead, and dump the rest into a vanguard VTSMX or something similar then?


For a traditional IRA

AGI is $118,000 or more (married couple filing jointly) or $10,000 for a married person filing separately.

For Roth IRA
Married filing jointly you must earn less than $183,000 to fully contribute to a Roth IRA or $10,000 for a married person filing separately.

[onlykelsey]

Posting to follow.  My husband (married last year) contributed to a myRA for all of last year, but because he's deemed to have been married to (high earning) me the entire year, I think those contributions weren't allowed to be made.  We're trying to figure out whether he can do a rollover, or whether he has to take out all the contributions (plus interest???), or what.

[therethere]

You should be able to recharacterize the contributions from 2015 to Roth IRA and just pay the taxes on the contributed amount. Plenty of people do this in the opposite direction (recharacterize from Roth to Traditional when they realize they can deduct it). Its usually a simple phone call to your brokerage firm or wherever the account is held. You don't have to recharacterize everything in the account. You can have a traditional IRA and a Roth IRA at the same time. You just have to choose which one you want to contribute your 5,500 to each year based on whether you are above the deduction limits.

Are you really saying you don't have the $1,000 taxes to pay on your 2015 contributions but you make well over 120k combined?

[dandarc]

Recharacterize for 2015.

If your income comes in above the Roth limit in future years, do a backdoor Roth IRA.

Finally, the limits are against MAGI, not AGI.  A few other details, but basically you can't use the tIRA deduction itself to qualify to deduct the tIRA contribution.  Ways to reduce MAGI include maxing 401K/403B/457B, HSA, the variety of FSAs, paying health and dental premiums through work.  Self employed?  Open a SoloK if you make under about $250K or SEP IRA if you make over $250K.

Basically, your salary can be pretty far above the limit and your MAGI still under it.  Even if you are over the limit, you can do a backdoor Roth IRA.

And even if the backdoor gets outlawed, you're making pretty ridiculous money, I think you'll be OK.

[dandarc]

Posting to follow.  My husband (married last year) contributed to a myRA for all of last year, but because he's deemed to have been married to (high earning) me the entire year, I think those contributions weren't allowed to be made.  We're trying to figure out whether he can do a rollover, or whether he has to take out all the contributions (plus interest???), or what.

Yeah, might have to get a return of excess contribution there.  Does he have any tIRA money?  If not, you could recharacterize to Traditional, then convert to Roth - basically add a step to the backdoor Roth technique.