I have an IRA but now that I am retired I would li...
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pln8789
New Member

I have an IRA but now that I am retired I would like to switch assets to a Roth IRA and avoid taxes?

How much can I transfer from an IRA to  Roth IRA without incurring taxes?
3 Replies
Bsch4477
Level 15

I have an IRA but now that I am retired I would like to switch assets to a Roth IRA and avoid taxes?

The amount transferred from your IRA to your Roth will be added to your other income and taxed as ordinary income. 

fanfare
Level 15

I have an IRA but now that I am retired I would like to switch assets to a Roth IRA and avoid taxes?

you can convert all you want as long as you stay under the threshold of taxable income that generates a tax on Line 16.

Generally you have to run the tax return to know where that point is.

ErnieS0
Employee Tax Expert

I have an IRA but now that I am retired I would like to switch assets to a Roth IRA and avoid taxes?

Yes @Bsch4477 and @fanfare are correct. Money in a traditional IRA has generally never been taxed. You received a tax deduction when you contributed to the IRA and all the earnings inside the account grew tax free.

 

So any money you “convert,” i.e. move to a Roth is taxable and added to the rest of your income.

 

For Tax Year 2020, you will not pay any tax if your combined income (IRA conversions plus any other income) is

  • $12,400 or less and you file single or married separate.
  • Married filing joint or qualifying widowers can make $24,800.
  • Head of household 65 can make $18,650.

If you are 65 or older, you can make $14,050 if filing single or married filing separate, $26,100 if married and only one is over 65 or $27,400 if both are over 65 or $20,300 if head of household.

 

Unlike IRA contributions, conversions are recorded in the year they take place, so any money you withdraw will count against 2021 income so plan ahead if you want to move money into your Roth.

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