can a Traditional IRA be converted to a Roth IRA so that the tax free earnings potential can be utilized sooner rather than later?
If a traditional IRA is to be transferred to a Roth IRA, the earnings generally are subject to tax in the year of transfer. Also, traditional IRAs may contain previously taxed funds. The best example of this is a traditional IRA contribution made after the law changed in 1986. Be Aware While an individual may have Traditional IRAs that are fully taxable and others that are partially taxable, the transfer considers all IRAs to be one. For example, an individual has two traditional IRAs, one worth $10,000 that is fully taxable and another worth $10,000 that is totally non-taxable. If the individual wants to transfer the fully non-taxable IRA to a Roth IRA $5,000 of the $10,000 is taxable. See IRS Form 8606. Rules for Converting Non Roth Funds to a Roth IRA Tests to Meet: • AGI (generally your total income before itemized deductions) for year of conversion is less than $100,000; and • Married filing separate individuals are eligible only if living apart for the entire year. The taxpayer d
Related Questions
- Can someone in 2010 or later who does not have a traditional IRA and is ineligible to contribute to a Roth IRA make a single contribution to a traditional IRA and immediately convert it to a Roth?
- can a Traditional IRA be converted to a Roth IRA so that the tax free earnings potential can be utilized sooner rather than later?
- What is the tax free allowance limit on earnings?