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Since our traditional IRA accounts are both in the red currently, I was wondering if it were possible to convert them into a Roth IRA or ideally into our current Roth accounts.

Yes, it's possible as long as you file jointly and your joint AGI without the income from the conversion is under $100,000. If you're under 59 1/2 you want to make sure you have the cash in non-retirement accounts to pay the tax.

My wife is self-employed, so we have excess income which would be nice to shelter from taxes through a "loss." That is why I was thinking about converting the traditional IRAs.

Hmmm. It sounds to me like you're thinking that since your traditional IRAs have lost value you have a tax loss. You don't. That money, assuming it was all pre-tax contributions, has never been taxed, so the amount you convert will be taxable ordinary income, dollar for dollar.

Since your wife is self-employed she can shelter a good portion of her earnings through a SEP contribution. Even higher deductions may be available with a different retirement plan. See IRS Publication 560.

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