Roth contribution in same year as Traditional IRA to ROTH conversion

[burgerguy14]

I am planning to convert part of my Traditional IRA to a Roth IRA for 2023.  Can I also make a contribution to a ROTH IRA for the same tax year?  Or would that be considered an over contribution?

[SteamTrain · Accepted solution]

You should be OK with that.

 The conversion from a traditional IRA to a Roth IRA is NOT considered a contribution....but the conversion does add to your taxable income   (unless some portion of the traditional IRA contributions were not deductible).   Thus, some folks do the conversions over a couple years to keep taxes down.

In case it matters, remember that you do normally need working income (W-2 wages or self-employed profit) in order to make the Roth IRA contribution itself.

[burgerguy14]

Thanks.  I do not have w-2 income.  I am retired and receive rental property income.  But this year the rental income will be close to zero or slightly negative.  That must be why TurboTax created a Form 5329-T and "fined" me for over contributing (on paper).

[VolvoGirl]

Sorry you can not make any new contributions.  You can convert a IRA.  You need earned income from W2 wages or a Net Profit on Schedule C to contribute.  Rental income doesn't count as earned income not just because you had a loss.

[dmertz]

To be clear, Roth conversions are made in a particular year.  To be 2023 income, the distribution from the traditional IRA being converted to Roth must be made by December 31, 2023.  Given that there are only 4 business days remaining in 2023, make sure that your traditional IRA custodian can complete the distribution from the traditional IRA before 2024.

[SteamTrain]

...If you do end up doing a conversion of some IRA $$ to a Roth IRA this year, make sure you do not enter it in the software area where IRA or Roth IRA contributions are entered.

When you receive a 1099-R for that conversion (late Jan-early Feb), it will be entered as part of the follow-up questions when you enter that 1099-R in the income area of the software......and you will indicate that part-or-all of your IRA distribution was a conversion to a ROTH IRA.

AND...since you say you are retired, if you are age 73 or older for 2023?...In that case you would need to make sure you have taken, and kept your RMD$$  before you convert any $$ to the Roth IRA.  The RMD amount that is distributed cannot be converted.

[burgerguy14]

Good point on the deadline.  I'm fairly sure Fidelity lists the cutoff for Friday 4pm.  12/29/2023 being the last business day of the year.  I'll call and double check.

[CHL]

Note: if you do not have earned income (w2, etc), you can’t contribute to your Roth or IRA, as others have mentioned.  BUT, if  your spouse has earned income, you can contribute to your Roth or IRA, based on the ‘spousal IRA’ rule.  Search for that term online to get further details.

Conversions must be made by Dec 31st.  Contributions by tax deadline, typically April 15.

[burgerguy14]

Conversions have to be made by today.  Today is the last business day of 2023.

[CHL]

Yes, good point that today is the last trading day and not Dec 31st, a weekend.