IRA Conversion to Roth IRA tax saving strategy

#6 02-18-2005, 10:36 AM

Yes, that is a good point. In Illinois we don't get to
deduct barely anything from our income. We pay basically a
flat 3%.

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#5 02-15-2005, 05:11 AM

D. Stussy wrote:
- quote -

> Harlan Lunsford wrote:
> > Thomas Healy wrote:
> > > "michaeljc70[at]hotmail.com" <michaeljc70[at]hotmail.com> wrote:

> > > > I do consulting and my income varies. If I have a year where
> > > > I don't make very much money, I am thinking about converting
> > > > my traditional IRA to a Roth. The reasoning is this: any
> > > > taxable part I would have to pay would probably be offset by
> > > > my itemized deductions. I could control how much I convert
> > > > by only doing enough IRAs (I have multiple) at a time. My
> > > > itemized deductions generally run over $30K, regardless of
> > > > my income. This seems like a reasonable way to make good on
> > > > those deductions in a year when my income isn't high enough
> > > > too. Any comments on this strategy? It is basically
> > > > legally shifting income to a year where I don't have much.

> > > I recommend this strategy to many of my clients; in fact, it
> > > may pay to convert enough to fill up the 15% bracket. You
> > > can always convert more than enough; if you find you
> > > over-converted, you've got until October 15 to put the
> > > excess back into the IRA. Then, 30 days later, you can take
> > > it out for the next year.

> > ACtually I would say "to fill up at least the 10% bracket".
> > naturally I can say that, since over hear in the Southeast,
> > as opposed to Colorado, we do have clients in that bracket.

> Don't forget to look at your state's income tax brackets too....

Great advice and valuable addendum. Especially in Alabama,
where a single person has tax and therefore has to file
when gross is in excess of 1875$! So one could have state
tax on the distribution and no federal tax until over that
threshold 4850+3100. equals... uh... 7950.
Somebody check my math, which was my worst subject in high
school.

ChEAr$,
Harlan Lunsford, EA n LA

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#4 02-13-2005, 11:50 PM

Harlan Lunsford wrote:
- quote -

> Thomas Healy wrote:
> > "michaeljc70[at]hotmail.com" <michaeljc70[at]hotmail.com> wrote:

> > > I do consulting and my income varies. If I have a year where
> > > I don't make very much money, I am thinking about converting
> > > my traditional IRA to a Roth. The reasoning is this: any
> > > taxable part I would have to pay would probably be offset by
> > > my itemized deductions. I could control how much I convert
> > > by only doing enough IRAs (I have multiple) at a time. My
> > > itemized deductions generally run over $30K, regardless of
> > > my income. This seems like a reasonable way to make good on
> > > those deductions in a year when my income isn't high enough
> > > too. Any comments on this strategy? It is basically
> > > legally shifting income to a year where I don't have much.

> > I recommend this strategy to many of my clients; in fact, it
> > may pay to convert enough to fill up the 15% bracket. You
> > can always convert more than enough; if you find you
> > over-converted, you've got until October 15 to put the
> > excess back into the IRA. Then, 30 days later, you can take
> > it out for the next year.

> ACtually I would say "to fill up at least the 10% bracket".
> naturally I can say that, since over hear in the Southeast,
> as opposed to Colorado, we do have clients in that bracket.

Don't forget to look at your state's income tax brackets too....

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#3 02-11-2005, 07:24 AM

Thomas Healy wrote:
- quote -

> "michaeljc70[at]hotmail.com" <michaeljc70[at]hotmail.com> wrote:

> > I do consulting and my income varies. If I have a year where
> > I don't make very much money, I am thinking about converting
> > my traditional IRA to a Roth. The reasoning is this: any
> > taxable part I would have to pay would probably be offset by
> > my itemized deductions. I could control how much I convert
> > by only doing enough IRAs (I have multiple) at a time. My
> > itemized deductions generally run over $30K, regardless of
> > my income. This seems like a reasonable way to make good on
> > those deductions in a year when my income isn't high enough
> > too. Any comments on this strategy? It is basically
> > legally shifting income to a year where I don't have much.

- quote -

> I recommend this strategy to many of my clients; in fact, it
> may pay to convert enough to fill up the 15% bracket. You
> can always convert more than enough; if you find you
> over-converted, you've got until October 15 to put the
> excess back into the IRA. Then, 30 days later, you can take
> it out for the next year.

ACtually I would say "to fill up at least the 10% bracket".
naturally I can say that, since over hear in the Southeast,
as opposed to Colorado, we do have clients in that bracket.
(grin!

ChEAr$,
Harlan Lunsford, EA n LA
Thu 10 Feb 2005

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#2 02-10-2005, 07:27 AM

"michaeljc70[at]hotmail.com" <michaeljc70[at]hotmail.com> wrote:

- quote -

> I do consulting and my income varies. If I have a year where
> I don't make very much money, I am thinking about converting
> my traditional IRA to a Roth. The reasoning is this: any
> taxable part I would have to pay would probably be offset by
> my itemized deductions. I could control how much I convert
> by only doing enough IRAs (I have multiple) at a time. My
> itemized deductions generally run over $30K, regardless of
> my income. This seems like a reasonable way to make good on
> those deductions in a year when my income isn't high enough
> too. Any comments on this strategy? It is basically
> legally shifting income to a year where I don't have much.

I recommend this strategy to many of my clients; in fact, it
may pay to convert enough to fill up the 15% bracket. You
can always convert more than enough; if you find you
over-converted, you've got until October 15 to put the
excess back into the IRA. Then, 30 days later, you can take
it out for the next year.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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#1 02-10-2005, 06:49 AM

"michaeljc70[at]hotmail.com" <michaeljc70[at]hotmail.com> wrote:

- quote -

> I do consulting and my income varies. If I have a year where
> I don't make very much money, I am thinking about converting
> my traditional IRA to a Roth. The reasoning is this: any
> taxable part I would have to pay would probably be offset by
> my itemized deductions. I could control how much I convert
> by only doing enough IRAs (I have multiple) at a time. My
> itemized deductions generally run over $30K, regardless of
> my income. This seems like a reasonable way to make good on
> those deductions in a year when my income isn't high enough
> too. Any comments on this strategy? It is basically
> legally shifting income to a year where I don't have much.

It's a common financial planning strategy. The idea is
legal and makes sense if you can minimize the tax hit.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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02-10-2005, 05:13 AM

<michaeljc70[at]hotmail.com> wrote:

- quote -

> I do consulting and my income varies. If I have a year where
> I don't make very much money, I am thinking about converting
> my traditional IRA to a Roth. The reasoning is this: any
> taxable part I would have to pay would probably be offset by
> my itemized deductions. I could control how much I convert
> by only doing enough IRAs (I have multiple) at a time. My
> itemized deductions generally run over $30K, regardless of
> my income. This seems like a reasonable way to make good on
> those deductions in a year when my income isn't high enough
> too. Any comments on this strategy?

Sounds like a good idea to me

--
Phil Marti
Clarksburg, MD

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#-1 02-09-2005, 04:14 AM

I do consulting and my income varies. If I have a year where
I don't make very much money, I am thinking about converting
my traditional IRA to a Roth. The reasoning is this: any
taxable part I would have to pay would probably be offset by
my itemized deductions. I could control how much I convert
by only doing enough IRAs (I have multiple) at a time. My
itemized deductions generally run over $30K, regardless of
my income. This seems like a reasonable way to make good on
those deductions in a year when my income isn't high enough
too. Any comments on this strategy? It is basically
legally shifting income to a year where I don't have much.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

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