topic IRA conversion and tax implications in Deductions & credits

IRA conversion and tax implications

cspyon — Tue, 10 Feb 2026 10:56:28 GMT

I would like to convert my SEP-IRA balance and one tax-deferred annuity plan to my ROTH IRA.

Combined, the balance of the two accounts is $40,000.

So, this is my question:

If I convert this amount to my Roth IRA, does it count as my income and add up to my gross income or total income?

Re: IRA conversion and tax implications

Bsch4477 — Fri, 23 Feb 2024 16:30:33 GMT

It’s added to your gross income.

Re: IRA conversion and tax implications

cspyon — Fri, 23 Feb 2024 17:05:25 GMT

Really? Even conversion between accounts, not withdraw, is counted as my gross income? So, I will have to add $40,000 to my gross income when I file the tax returns next year?

Re: IRA conversion and tax implications

VolvoGirl — Fri, 23 Feb 2024 17:07:30 GMT

Yes. If you convert to a ROTH it is all taxable now. You need to roll it over to a Traditional IRA to keep it pre-tax.

Re: IRA conversion and tax implications

dmertz — Fri, 23 Feb 2024 17:15:29 GMT

That's the point of a Roth conversion. Include the taxable converted amount in income now instead of later and enjoy subsequent gains attributable to the converted amount being tax free once the requirements for qualified Roth IRA distributions are met.

Re: IRA conversion and tax implications

cspyon — Sat, 24 Feb 2024 12:49:26 GMT

So, is this the so-called backdoor Roth IRA?

Re: IRA conversion and tax implications

cspyon — Sat, 24 Feb 2024 13:01:26 GMT

Okay, let me ask one more.

I have a former company retirement account called TAX-DEFERRED ANNUITY PLAN. It's around $2,6000.

If I roll over (NOT convert) this whole amount to my Roth IRA, does it also count as my income and add up to my gross income when I file the tax returns next year?

Re: IRA conversion and tax implications

fanfare — Sat, 24 Feb 2024 17:16:54 GMT

A backdoor Roth contribution or backdoor Roth IRA, as you call it should be tax-free.

It is a two-step process.

It onty works tax-free if your Traditional IRA starts out at zero, or the latest basis is at least the current value.

Re: IRA conversion and tax implications

DanaB27 — Sat, 24 Feb 2024 17:44:43 GMT

Yes, it will be added to your taxable income since you had only pre-tax funds in the account.

If you move funds from a pre-tax/tax-deferred account to a Roth IRA then this is a conversion and not a rollover. And a conversion is taxable unless you had after-tax funds in the account.

@cspyon

Re: IRA conversion and tax implications

cspyon — Mon, 26 Feb 2024 16:02:30 GMT

Okay, one last question:

If I withdraw the money from my ROTH IRA, does it add up to my gross income, too?

Re: IRA conversion and tax implications

Bsch4477 — Mon, 26 Feb 2024 16:22:24 GMT

No. You already paid the tax when you did the conversion.