Message Font: Serif | Sans-Serif
No. of Recommendations: 0
downwardspiral wrote:

<< Say I have an AGI of $30,000, and my marginal tax rate is 15%. If I roll over a $100,000 regular IRA into
a Roth IRA, am I going to pay tax on that amount at my marginal tax rate, or at 28% once I hit that bracket, and maybe even into the higher rate if I hit that. >>


If you rollover a regular IRA into a Roth IRA in 1998, the income is recognized equally over 4 years. Thus, in each 1998, 1999, 2000, and 2001, you will report $25,000 of income from the deemed IRA distribution. So, in your hypo, you will report $55,000 in income which puts you in the 28% tax bracket.

Although you've probably heard that the TAX is spread out over 4 years, in actuality, the INCOME is spread out over 4 years.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.