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Building on the post from the person seeking info on the Roth, I seek guidance from Fooldom:


Since I exceed the income requirements for contributing to a Roth IRA, can I open a non-deductible traditional IRA, fund it with last year's max contribution and this year's contribution, and then within a day or two (essentially no earnings) do a conversion to a Roth?

If I *CAN* do it this year, is this the only year I can do it -i.e. does the loophole expire this year/next year?

Any and all help/insight appreciated!

canuck104
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Yes. However, if you already have any traditional, SEP or SIMPLE IRA(s), you'll have to combine all of them to determine how much of your Doth conversion will be basis (not taxed) and how much will be income. If you don't have any other IRAs, then the conversion would be tax free.


As to how long this work-around will exist is anyone's guess.

BruceM
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Yes. However, if you already have any traditional, SEP or SIMPLE IRA(s), you'll have to combine all of them to determine how much of your Doth conversion will be basis (not taxed) and how much will be income. If you don't have any other IRAs, then the conversion would be tax free.

Bruce's comments here are key. This is the reason we did not use this same strategy for me. I have a sizable Rollover IRA that would have to be considered in the calculation.

There is no expiration for this "loophole" in the law. The Congress and the President can change this at any time, however.

I put loophole in parentheses, because it is not a loophole at all. The Congress knew exactly what it was doing when it added this to the tax code.

Acme
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