Author Topic: Roth Conversion/Withdrawal Question  (Read 665 times)

TwoJays

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Roth Conversion/Withdrawal Question
« on: April 06, 2018, 11:21:22 AM »
Hi all,

I'm currently in school and looking at converting my IRA (~13k balance) to a Roth while DW and I won't have as much income as normal. We'll likely be withdrawing the funds in 2-3 years for our downpayment on a house (to house hack - otherwise it wouldn't be worth it). In doing so, I have two questions:

1) Do I pay taxes on the entirety when I convert it or are the funds treated differently depending on whether a) I contributed it, b) it's my employer's match, or c) it is a market gain.

2) Does the penalty exemption for withdrawals for a first house purchase depend on the above "contribution" categories as well?

Many thanks!

Rob_bob

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Re: Roth Conversion/Withdrawal Question
« Reply #1 on: April 06, 2018, 03:35:27 PM »
You will pay taxes on the total amount of the conversion.  My understanding is that when you do a conversion you have to own the Roth for 5 years before you can make a distribution.  I do not know if that applies if you take money out for a home down payment though.

I'm sure others will have better details.

MDM

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Re: Roth Conversion/Withdrawal Question
« Reply #2 on: April 06, 2018, 05:27:56 PM »
Based on 2017 Publication 590-B - p590b.pdf, you don't have to pay a penalty on up to $10K of distributions to buy, build, or rebuild a first home.