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Pixy, if you are here: how do I calculate the tax I would owe if I converted a traditional to Roth IRA. THe traditional is a combo of deductible and non.

If you're converting your entire traditional IRA to Roth, simply take it's current value and subtract the total of your nondeductible contributions. The net is your taxable income from the conversion. Multiply that by your marginal rate, and you have a good approximation of the tax effect. (Don't forget the state, if yours taxes this kind of transaction.)

Also, is this tax payable next year when I file? Can I use capital loss carry foward for this tax too?

The additional income may create or increase an estimated tax requirement. You can read about estimated taxes in the Tax Strategies board's FAQ and in IRS Publication 505. But basically, the conversion income goes on your return for the year in which you convert.

Just like any other distribution from a traditional IRA, the conversion income is ordinary income reported on line 15 of the 1040. You cannot directly apply a capital loss carryover to it. (If your Schedule D shows a net capital loss, you can use $3,000 of it on line 13 of the 1040, but that's it.)

Phil
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