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Using Turbotax to Calculate Marginal tax rate/conversion amount for Roth IRA Conversions


Using Turbotax to Calculate Marginal tax rate/conversion amount for Roth IRA Conversions Roth Conversion Ladders Starting 2018 you can no longer re-characterize your roth ira conversion after the fact. In this example I will show you how to use turbotax to calculate your true marginal tax rate and why tax tables should not be used to calculate the amount of your contribution. 1. Roth IRAs a. No tax for life b. Better for inheritance c. Not Subject to MRD age 70.5 d. Can be used to avoid early withdrawal penalties 2. Roth IRA conversions a. Convert from IRA to Roth and pay tax now at lower rate(target rate) than you think you will pay in the Future b. You need to do this before tax year end. You can’t re-characterize (give back after the year ends) c. Create ladder 3. Marginal tax rates a. Progressive tax rate tables b. The tax rate last dollar is taxed at 4. Determine top marginal tax rate target a. Project your income in future year and get your rate you will likely pay with MRD etc b. Determine favorable rate eg 12% 5. Load your info into Turbo tax and vary you income using 2018 tax software. The end result – by doing systematic partial Roth conversions for several years in a row, it’s possible to remain in (and fully utilize) the lower tax brackets, while avoiding higher tax rates today, and whittling down pre-tax retirement accounts to the point that RMDs won’t be subject to higher tax rates in the future, either! Links ...(read more)


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