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My wife and I are both over 60. I am self-employed and am not covered by a pension plan. My wife is covered by a pension plan. She also contributes the maximum to her 403(b).

We use Turbo Tax to calculate our taxes.

Our total income on Line 22 on Form 1040 is $69,339.

TurboTax allows me to contribute $3,500 to a deductible Traditional IRA. TurboTax allows my wife to contribute $3,500 to a traditional IRA - $590 as the deductible amount and $2,910 as the nondeductible amount.

The deductible amount of the IRA contributions ($4,090) appears on Line 24.
One half of my SE Tax ($1, 021) appears on Line 28. These two amounts are then subtracted from total income and give us an AGI of $64,228. After the deductions on page 2 of Form 1040 we owe $394 Fed Tax for 2003.

My question:
When I try to change the non-deductible portion ($2,910) of my wife's Traditional IRA to a Roth IRA it recalculates the Fed Tax due from $394 to over $700. I thought that since both are nondeductible amounts and our income is under $70k that there would be no difference in Fed Tax.

Can anyone here tell me what I am doing wrong?

Thank you for any assistance.
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