Trad IRA converted to Roth IRA

[ddhayes]

I converted $44 K+ from a traditional IRA to a Roth IRA. I am in the 22% tax bracket. How do I figure out what the taxes will be on the converted amount? I don't thinks it's a straight 22% is it?

[macuser_22]

Probably or close to it.      It is taxed as ordinary income and adds to your AGI so the tax will depend on your margional tax rate which for most people will be the tax bracket you are in but could span brackets and have different tax rates or other factors like capital gains tax (if any) can affect the overall tax.

[NCperson]

and don't forget the similar impact on state taxes.....

[ddhayes]

WOW,  that bites!! So you think the tax on that conversion will be close to 10 grand? guess I'd better do a pre-pay!

Thanks!

[macuser_22]

No different that getting a $44K bonus in your pay check - it adds $44K to your taxable income.

While Roth might have some long term advantage over Traditional IRA's, one must look at the initial tax hit and how many years to the break-even point when deciding  to convert or not.

That is why many people convert a little every year and then not so much that it pushes them into a higher tax bracket.