TurboTax does not have a tool for multi-year Roth conversion planning. TurboTax is designed to prepare and report taxes on a year-by-year basis. TurboTax can accurately process a Roth conversion for a specific tax year, it does not have the modeling capabilities necessary to strategically plan conversions over the entire "retirement valley." TurboTax is designed to report on the conversion after it occurs, not projecting and creating the best strategy for the future.
Many brokerage firms also offer free online calculators to help model the tax impact of a Roth conversion based on different scenarios. I would check with your financial institution to see what Roth Conversion Calculator they may have available.
Some things to keep in mind when you do use a calculator to help plan for multi-year conversion:
- Tax brackets: By spreading out conversions over several low-income years, you can fill up your lower tax brackets (e.g., the 12% or 22% brackets) and avoid pushing yourself into a higher one.
- Medicare premiums: Higher income from a Roth conversion can trigger Income-Related Monthly Adjustment Amounts (IRMAA), increasing your Medicare Part B and D premiums. A good calculator will help you plan conversions to stay below IRMAA thresholds.
- Social Security tax: A higher taxable income from a conversion can increase the amount of your Social Security benefits that are subject to federal income tax.
- State taxes: Don't forget to account for state and local income taxes, which can vary and impact the cost-benefit analysis of your conversion
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