Regular IRA to Roth IRA conversion

Forum|Forum|2 years ago
December 14, 2023
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I'm considering converting funds from one of my regular IRAs to one of my Roth IRAs by the end of 2023. I'll be in the lowest federal tax bracket for 2023. Not only that, my income this year is so low that I shouldn't owe any federal income tax at all for 2023. I've done a rough calculation and determined this. I'm almost certainly going to be in a higher tax bracket in the coming years, since I plan on fully retiring in about two years and starting to take social security. In the meantime I might purchase an annuity. So I thought that this might be a good time to do a conversion of at least some of my regular IRA money.

I read in an article that if my total taxable income, including the IRA withdrawal, doesn’t exceed my standard deduction, I wouldn’t owe income taxes on the conversion. Is this true? I can't find any more information about it. Please direct me to a reputable source that states this. Also, any advice about how to determine whether a conversion would be a wise move would be appreciated. Thanks for your time.

Best answer by dmertz

"if my total taxable income, including the IRA withdrawal, doesn’t exceed my standard deduction, I wouldn’t owe income taxes on the conversion. Is this true?"

True. The standard deduction is subtracted from your AGI in calculating your taxable income. You would not have any income tax on Form 1040 line 16 if your taxable income on line 15 is zero. Be aware, though, that the increase in your income from the Roth conversion could have side effects that increase your AGI by more than the amount of the Roth conversion (such as an increase in the amount of taxable Social Security benefits if you receive such benefits), so it's best to prepare a simulated tax return using the CD/download version of TurboTax to check for such things.

dmertzAnswer

Employee

"if my total taxable income, including the IRA withdrawal, doesn’t exceed my standard deduction, I wouldn’t owe income taxes on the conversion. Is this true?"