Impacts of qualified dividends on Roth conversion ladder

[JA1234]

Can someone help me understand if/how qualified dividends impact income for roth conversion ladder strategies?  Let's assume I have 1MM in a non-qualified brokerage account that earls $35,000 in qualified dividends annually.  For simplicity sake let's assume I have no other income and am MFJ with 2 dependents so our free tax space is approx. 12600+4x4000=$28,600.  Do the qualified dividends impact my free conversion ladder space?

[MDM]

Do the qualified dividends impact my free conversion ladder space?

Maybe.

See https://www.bogleheads.org/forum/viewtopic.php?f=1&t=210337&p=3229729#p3227606.  It says the case study spreadsheet was used to generate the plots, so you could do likewise with your specific numbers.

[JA1234]

Thanks for the spreadsheet.  It was interesting to run a few scenarios.  If I understand it correctly having ordinary income above the standard deduction+personal exemptions reduces the ability to use the 0% tax rate on qualified dividends by the amount ordinary income over that figure.  It looks like it essentially pushes more qualified dividends into the 15% tax bracket. 

It seems like the best strategy for long term tax benefits is to use all of the 0% qualified dividend space and keep ordinary income at or below standard deductions+personal exemptions.  Does that seem like I have it right?
 

[dandarc]

If it is exactly as stated - $35K qualified dividends, no other income of any kind, then you can convert up to your standard deduction + exemptions with no federal income tax.

So, with your numbers, ignoring things like ACA subsidies, you should convert $28,800, then tax-gain harvest 11,500 if you can to step up your basis.  That gives you 28,800 - ordinary income at 0%, 35,000 qualified dividends at 0%, 11,500 long term capital gains at 0% = $75300 - the top of the 0% qualified dividend / long term capital gains bracket for MFJ (2016).

Edited to fix numbers - was looking at the wrong chart.