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Hello Fools,

I was referred to this board for a tax question. Thanks in advance for your help!

If I want to roll my Traditional IRA (which came from a rolled-over 401k) into a ROTH IRA, how do I report this on my taxes? Will the amount be considered gross income for that tax year and be taxed at my marginal federal tax rate, potentially kicking me into a higher tax bracket?

Also, will the pre-tax contributions that I and my employer have made into the account (from the 401k days) be taxed at a different % than the interest earned over the years? Is that interest considered long-term capital gains? OR is the entire amount that I rollover considered simply ordinary income?


Thanks,
Carl
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If I want to roll my Traditional IRA (which came from a rolled-over 401k) into a ROTH IRA, how do I report this on my taxes? Will the amount be considered gross income for that tax year and be taxed at my marginal federal tax rate, potentially kicking me into a higher tax bracket?

You report it on Form 8606, Part II, which flows to line 15 of the 1040, where the income from the conversion gets added to your other income for the year of conversion. Remember that you do not have to convert your entire IRA holding. If you're worried about winding up in a higher bracket, you can restrict the amount converted to keep yourself in your current bracket, then do more the next year, etc. Also, remember that your bracket reflects just the rate at which your last dollar of taxable income is taxed. It doesn't affect the rate for income in the brackets you passed through on the way.

Also, will the pre-tax contributions that I and my employer have made into the account (from the 401k days) be taxed at a different % than the interest earned over the years? Is that interest considered long-term capital gains? OR is the entire amount that I rollover considered simply ordinary income?

It's all ordinary income.

Phil
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