Author Topic: Traditional IRA to Roth conversion that's almost tax-free?  (Read 1871 times)

edjusted

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I've been reading some of the posts about converting Traditional IRAs to Roth, and I suddenly thought about Steve Job's $1 salary when he first came back to Apple.

You can convert a Traditional IRA to a Roth at any time, correct? And of course you pay whatever tax rate you're at.
But what if you convert it during an odd year where you either have really low income (e.g. Steve Job's $1/yr salary) or you're just taking a year off? Does that mean the conversion is at the 10% rate, assuming you're converting under $9325? Or are there any rules preventing this from happening?

I know I'm oversimplifying this, but it seems too good to be true.
« Last Edit: May 20, 2017, 12:39:24 AM by edjusted »

MDM

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Re: Traditional IRA to Roth conversion that's almost tax-free?
« Reply #1 on: May 20, 2017, 01:46:32 AM »
...you pay whatever tax rate you're at.
It's really that simple.

SeattleCPA

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Re: Traditional IRA to Roth conversion that's almost tax-free?
« Reply #2 on: May 20, 2017, 04:13:09 PM »
But remember whatever you convert counts as income. E.g., if you convert (say) $1,000,000, you going pay $400K or whatever in federal and state income taxes.

Babybalrog

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PhysicianOnFIRE

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Re: Traditional IRA to Roth conversion that's almost tax-free?
« Reply #4 on: May 22, 2017, 06:25:39 PM »
In early retirement, if you have no other income, you can convert the amount of your standard deduction and exemption(s) tax-free. so that's more than $10,000 for an individual, and $20,000 for a couple annually. Add about $4,000 per dependent and don't forget about the child tax credit to offset additional conversions on top of that.

SeattleCPA

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Re: Traditional IRA to Roth conversion that's almost tax-free?
« Reply #5 on: May 22, 2017, 07:34:41 PM »
In early retirement, if you have no other income, you can convert the amount of your standard deduction and exemption(s) tax-free. so that's more than $10,000 for an individual, and $20,000 for a couple annually. Add about $4,000 per dependent and don't forget about the child tax credit to offset additional conversions on top of that.

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