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Re: mightymite1 post# 139425

Monday, 01/17/2022 9:29:45 AM

Monday, January 17, 2022 9:29:45 AM

Post# of 198944
https://www.investopedia.com/articles/retirement/08/roth-conversion-2010.asp

How Much Tax Will You Owe on a Roth IRA Conversion?

When you convert from a traditional IRA to a Roth, the amount you convert is added to your gross income for that tax year. It increases your income and you pay your ordinary tax rate on the conversion.

Say you’re in the 22% tax bracket and convert $20,000. Your income for the tax year will increase by $20,000. Assuming this doesn’t push you into a higher tax bracket, you’ll owe $4,400 in taxes on the conversion.

Be careful here. It’s never a good idea to use your retirement account to cover the tax you owe on the conversion. Doing so would lower your retirement balance, which could cost you thousands of dollars in growth over the long-term. Instead, save up enough cash in a savings account to cover your conversion taxes.