Re: Roth conversion taxes

From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Roth conversion taxes
Date: Tue, 20 Oct 1998 08:20:45 -0400

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>As I understand it, upon conversion, my $20K IRA would count as an additional
>$20K of income for me this year, which I could then divide over 4 years.   Net
>result is an additional $5K of income each year.  True?  

True.  For conversions done in calendar year 1998, you can take the
$20K of conversion income all this year or split the income over 4
years.  For conversions done after 1998 you have to take all the
conversion income in the year you do the conversion.

>But, If I go to grad school in 1999, I will have very low income (probably
>$15K salary).  Would it then make sense to convert in 99, assuming I wouldn't
>be paying much in taxes on my low salary?

Absolutely!  Converting to a Roth essentially locks in your tax bracket
at the time of conversion.  If you can lock in a lower bracket, go for it.

But you should run the numbers and see exactly what bracket you're in.
If you're in the 15% bracket now, it might not hurt you to convert this
year, especially if you elect to split the income over 4 years.

Rich Carreiro
rlcarr@animato.pn.com
P5-100/RedHat Linux 4.1


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