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When I do a conversion from Traditional IRA to Roth IRA, my taxes seem higher than what it should be for my income tax bracket. Why?

 
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2 Replies
DanaB27
Employee Tax Expert

When I do a conversion from Traditional IRA to Roth IRA, my taxes seem higher than what it should be for my income tax bracket. Why?

Please be aware, that a conversion to a Roth is taxable and it might increase your taxable income enough to push you in the next tax bracket.

 

Did you have any nondeductible contribution (basis) in your traditional IRA? If it was  from previous years then you need to enter this in the 1099-R section:

 

  1. Click on "Search" on the top right and type “1099-R”
  2. Click on “Jump to 1099-R”
  3. Click "Continue" and enter the information from your 1099-R
  4. Answer questions until you get to “Tell us if you moved the money through a rollover or conversion” and choose “I converted some or all of it to a Roth IRA
  5. On the "Your 1099-R Entries" screen click "continue"
  6. Answer "yes" to "Any nondeductible Contributions to your IRA?" if you had any nondeductible contributions in prior years.
  7. Answer the questions about the basis and value

 

 

If you made a nondeductible contribution in 2021 then please follow these steps:

 

  1. Login to your TurboTax Account 
  2. Click on "Search" on the top right and type “IRA contributions”
  3. Click on “Jump to IRA contributions"
  4. Select “traditional IRA
  5. Answer “No” to “Is This a Repayment of a Retirement Distribution?
  6. Enter the amount you contributed
  7. Answer “No” to the recharacterized question on the “Did You Change Your Mind?” screen
  8. Answer the next questions until you get to “Any Nondeductible Contributions to Your IRA?” and select “Yes” if you had a nondeductible contributions before this tax year.
  9. If you had a basis in the Traditional IRA before then enter the amount.
  10. On the “Choose Not to Deduct IRA Contributions” screen choose “Yes, make part of my IRA contribution nondeductible” and enter the amount (If you have a retirement plan at work and are over the income limit it will be nondeductible automatically and you only get a screen saying $0 is deductible).

 

 

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When I do a conversion from Traditional IRA to Roth IRA, my taxes seem higher than what it should be for my income tax bracket. Why?

Are you receiving social security?  The added income from the Roth conversion may be making more of your social security taxable as well as the tax on the conversion. 

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