The Motley Fool Discussion Boards

Previous Page

Retirement Discussions / Retirement for 20 Somethings

URL:  http://boards.fool.com/roth-ira-conv-for-those-who-make-too-much-money-28356404.aspx

Subject:  Roth IRA conv. for those who make too much money Date:  3/8/2010  6:58 PM
Author:  R0BI2010 Number:  21 of 26

Thanks in advance for anyone who can help:

I have a traditional IRA that I have been contributing to for a couple of years, but have never been able to write the contributions off on my taxes because my income is too high (i.e., none of the contributions were tax-deferred.)

I now want to convert the traditional IRA over to a Roth IRA, and I am wondering what the tax implications are. Since I have already paid taxes on the contributions to the traditional IRA, there should be no tax implications for converting that portion over to the Roth IRA, right? What about the gains I've made on the securities held in the traditional IRA that are to be converted over to the Roth IRA? I'm not sure how the conversion works, but I'm not planning on selling anything, so those gains will not be realized, correct? That would seem to mean that there would be no tax implications on those either. However, I would be taxed on those gains in the end if I stuck with the traditional IRA, so I could see having to pay tax on them regardless of whether they are realized (as, in the end with the Roth IRA, I won't have to pay taxes on gains...)

To sum up, it seems to me that for those whose income has been too high to write off their traditional IRA contributions on their taxes, a conversion of their traditional IRA to a Roth IRA should result in no adverse tax consequences other than the possible paying of taxes for gains made before conversion.

Does anyone have any advice?
Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us