The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies

URL:  http://boards.fool.com/vkmath-writes-can-someone-verify-for-me-the-10799959.aspx

Subject:  Re: RothConversion Income Limit Date:  4/23/1999  1:38 PM
Author:  Bob78164 Number:  15033 of 121572

vkmath writes:

Can someone verify for me the maximum that a joint couple's income can be in order to convert an IRA Rollover to a Roth IRA Rollover. My understanding is $100,000 AGI is the limit for conversion, while $150,000 is the limit for a $2,000 annual Roth IRA. Is this correct?

Second, if I contribute 5% to my company's 401k plan, can I still contribute $2,000 to a Roth IRA, assuming my income is > $2K, but < $150K?

Lastly, if my Rollover is $50,000 and my joint adjusted gross income is $90K - $100K, what should I expect the Federal & State tax liability to be? Do I literally, multiple the rollover amount times 28% if that is my bracket?


I reply:

Your understanding of the income limits is correct. As you probably know, the income generated by your conversion does not count toward the $100,000 limit. Your 401(k) contributions do not affect your ability to contribute to a Roth IRA (other than by lowering your AGI).

The liability is a tougher question. Multiplying the rollover amount by 28% will probably give you a rough estimate of the federal liability. It will probably be an underestimate, though, for a couple of reasons. If you take medical deductions or miscellaneous itemized deductions, raising your AGI will raise the "floor" for these deductions, thereby reducing them. Also, the numbers you give will likely trigger the reduction in itemized deductions for high-income taxpayers. On the other hand, if you increase your state tax withholding this year, you will increase your itemized deductions. There's no way to know how it will play out other than to run the numbers. Good luck! --Bob
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us