Strong Tower Advisors · Educational guide

Roth conversions

What to understand before moving pre-tax money into a Roth IRA.

Tax considerations before a conversion

Ordinary income. The taxable part of a conversion is added to your income for the year and can push income into a higher bracket.
Paying the tax. Paying the tax from the converted money reduces what ends up in the Roth, and for someone under 59½ the amount withheld can be treated as a distribution subject to the 10% additional tax.
Pro-rata rule. If you have both pre-tax and after-tax (nondeductible) money in traditional IRAs, you generally cannot convert only the after-tax part. Form 8606 tracks basis.
Ripple effects. Higher income in the conversion year can affect how much of your Social Security benefits are taxed, Medicare Part B and D premiums (income-related adjustments use the tax return from two years earlier), Marketplace premium tax credits before Medicare, and some state taxes.
No do-overs. Because a conversion cannot be recharacterized, it is usually worth running a projection with a tax professional before acting, often later in the year once income is clearer.

Our article on the Roth conversion window between retirement and RMDs goes deeper on timing.

Questions to bring to your tax professional

What is my expected marginal rate this year versus later?
Do I have nondeductible IRA basis (Form 8606)?
How would added income affect my Medicare premiums, Social Security taxation or health-insurance credits?
When did my first Roth five-year clock start?
Where would the money to pay the tax come from?

Frequently asked questions

Is there an income limit on Roth conversions?

No. Anyone with eligible pre-tax money can convert regardless of income. The pre-tax amount converted is taxable as ordinary income in the year of the conversion, and since 2018 a conversion cannot be undone by recharacterization.

Is a Roth conversion taxable?

Yes. The pre-tax amount converted is added to your income and taxed as ordinary income in the year of the conversion. If you are under 59½, tax withheld from the converted money can be treated as a distribution subject to the 10% additional tax.

Can I convert my required minimum distribution to a Roth IRA?

No. An RMD due for the year is not eligible to be converted or rolled over. It must be taken first; amounts above the RMD can then be converted.

Sources

Educational only. This guide is not individualized investment, tax, legal or insurance advice and does not recommend any account, transaction or product. Rules and individual circumstances vary. Verify current official information and consult qualified professionals.