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chriswlezien
Level 1

How are taxes paid on a IRA to Roth IRA rollover

I have some a good amount of money saved up in a traditional IRA and wanted to wait until I got married (joint filing with a low income spouse) to roll it over into a Roth IRA, which I will be doing this year. My question is how are the taxes paid on a IRA to Roth conversion; is it paid out of the balance being rolled over, or do I need to pay the hefty tax bill with post tax earnings?
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MichaelL1
Level 15

How are taxes paid on a IRA to Roth IRA rollover

You can do it both ways, however, if you pay the taxes out the money rolled over and are under 59 1/2 you will have a 10% early withdrawal penalty on that portion, as it would then be a withdrawal and a rollover.

One option you may want to consider is rolling over some each year, to avoid a large tax bite.  So maybe 20% a year for 5 years.  

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1 Reply
MichaelL1
Level 15

How are taxes paid on a IRA to Roth IRA rollover

You can do it both ways, however, if you pay the taxes out the money rolled over and are under 59 1/2 you will have a 10% early withdrawal penalty on that portion, as it would then be a withdrawal and a rollover.

One option you may want to consider is rolling over some each year, to avoid a large tax bite.  So maybe 20% a year for 5 years.  

View solution in original post

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