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Roth IRA conversions: A touch of class

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in Small Business Tax,Small Business Tax Deduction Strategies

The tax pundits have been saying it all year: Now is the time for a Roth IRA conversion. With the prospect of higher taxes in 2013, plus the imposition of the new 3.8% Medicare surtax on investment income, it makes more sense than ever for well-off individuals to convert a traditional IRA to a Roth.

Strategy: Don’t put all your eggs in one basket. Rather than using one account, set up multiple Roth IRAs based on the asset classes of the current investments in your traditional IRA. You could end up with a half-dozen or more Roth accounts.

The reason for this technique is to provide flexibility in case you want to recharacterize Roth funds at a later date. It’s like giving yourself a “get out of jail” card in Monopoly.

Here’s the whole story: When traditional IRA distributions are received, you’re taxed at ordinary income rates on the portion of the payout representing deductible contributions and earnings. Beginning in 2013, ...(register to read more)

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