Roll tradtional IRA to roth
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Level 2

Roll tradtional IRA to roth

Hello all

I quit my job last year and my job rolled my 401K over to a self directed ira. Then in March 2020 I rolled it to Fidelity as traditional IRA for stock trading. In May 2020, I created another tradtional ira account with Fidelity and contribute $6K in there expecting to get a tax deduction this year, but now I want to move everything over to Roth IRA before I am moving up the tax bracket. Is it possible to roll over to Roth IRA this year. What do I need to do? And will I get penalized for it? Thank you so much in advance.

3 Replies
Level 15

Roll tradtional IRA to roth

Traditional IRA to Roth are conversions which are fully taxable as ordinary income at your margional tax rate unless you have after-tax (non-deductible Traditional IRA contributions) in which case the after-tax part is pro-rated over the conversion amount and total IRA value which can result in some reduction of tax.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
Opus 17
Level 15

Roll tradtional IRA to roth

A conversion is not a rollover, and is not affected by contribution limits.  You can do a conversion of IRA plan A into new plan C,  and also do a conversion of Fidelity plan B into new plan C.  As long as the transaction happens direct between the trustees (you don't get a check that you have to forward) then it does not affect your contribution limit or the 1 rollover per year limit.


The conversion will be taxable as your ordinary income rate, of course. 


You could wind up with penalties if you take the money out of plan A or B as a check and try to put it in plan C on your own, and make a mistake.  So just make sure the conversion is direct trustee to trustee. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Level 2

Roll tradtional IRA to roth

Thank you all. I took the opportunity when the stock was down to do my conversion to minimize my tax.

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