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samiller156 · Joined: 25 Jan 2010 Posts: 1 1.30 Dollars($)

Your 41 Calculators conversion results shows substantial taxes due for a Roth IRA after conversion of a traditional IRA. For each $100K converted, the Roth IRA taxes due are approximately $43K more than the traditional IRA comparison. The traditional IRA shows only the taxes at conversion as the total due. I thought the reason to convert was to receive distributions tax free. Are the column titles switched?

savior70 · Posted: Tue Jan 26, 2010 4:05 am Post subject:

Hi samiller,

As far as I know, when you convert traditional IRA into Roth IRA, you need to pay taxes on the traditional IRA. The amount will be taxed as your ordinary income. In fact in case of a Roth IRA, you do not get immediate tax deductions as you do in a traditional IRA. But Roth IRA does allow you to withdraw money from your account tax-free at the retirement. Thus, you will have to taxes when you convert traditional IRA into Roth IRA. Now, it depends on your particular situation if the benefits you get from conversion into Roth IRA surpass the amount of taxes you pay at the time of the conversion.

However, if you want to convert your traditional IRA into Roth IRA, this is the best time to do it. If you convert in this year, you do not have to report the income in 2010. You can report half the amount in 2011 and the rest half in 2012 on your taxes.

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What causes Roth IRA taxes due in your conversion calculator?

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