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Greetings, Jasminea, and welcome. You asked:

<<I decided to convert my traditional IRA to Roth IRA. I want to know how much will I get taxed and when will I be paying these taxes and what forms do I need. My scenario is: I have just started saving for the IRA in the past three years. I have taken tax deduction for the past two, I am planning not to take it this year. Also wanted to know if I was going to be taxed for the standard $2,000 deduction or also for the interest that they have made in the past years. And would my deduction for 1998 not be taxed as I will not be taking the deduction for it in 1998 tax year. >>

When you convert your traditional IRA to a Roth IRA, you must declare all previously untaxed monies in that IRA as income (i.e., all earnings and all contributions for which you did not take a deduction). The IRA will be valued at market at the time of transfer. As an example, let's say over the past three years you contributed $2K per year, two contributions being deductible and the other not deductible. Today the account is worth $8K and you convert it to a Roth IRA. Because you made $2K in nondeductible contributions, only $6K of the conversion amount will be taxed. In essence, you will declare that $6K as income in the year of conversion. It will be taxed along with all other taxable income based on your bill as determined by your total taxable income. In general, you can say it will be taxed at your marginal tax rate.

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