Are you planning to convert funds in a traditional IRA to a Roth before year-end? The trick is to minimize the tax damage by bumping up against the top of your marginal tax bracket.
Strategy: Go well above the upper threshold. The tax law allows you to undo part of a Roth conversion after the fact—it’s called a recharacterization—so you’re able to reduce your eventual tax liability, if necessary.
You have plenty of time to make the necessary adjustments next year for a conversion occurring in 2015.
Here’s the whole story: With a traditional IRA, contributions may be wholly or partially deductible, but deductions are disallowed for high-income individuals. When distributions are received, you’re taxed at ordinary income rates reaching up to 39.6% on the portion of the payout representing deductible contributions and account earnings. Also, under the rules for required minimum distributions (RMDs), you must begin taking mone...(register to read more)
- Small Business Tax Deduction Strategies No matches