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How to use RMD for Roth contribution

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in Small Business Tax

Q. I’m taking an RMD from an IRA. Can I contribute it to a Roth IRA? I.F., Lake Tahoe, Nev.

A. Not exactly, but there may be a way to effectively do this. As with a traditional IRA, contributions to a Roth IRA are allowed only up to the amount of your “earned income” or an annual threshold. For 2014, the annual threshold is $6,500 for taxpayers age 50 or older. However, if you qualify for an IRA contribution (i.e., you have earned income), there is nothing to prevent you from using money from your required minimum distribution (RMD) to fund a Roth contribution, as long as you don’t exceed the annual statutory contribution limit. Of course, the RMD is still taxable.

Tip: Alternatively, consider converting funds in a traditional IRA to a Roth. 

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