Thanks this is what I would have assumed. But for some reason when I add a $10,000 dollar conversion to the dinkytown.net tax calculator more like $2,000 is added to taxes, even though my entries are no where near the %20 tax bracket.When converting from a Traditional IRA to a Roth IRA, taxes will be due on the conversion at the ordinary income tax rate, since the tIRA was tax-deferred.$0, $500, $1000, $2000?
I’m just wondering what other’s of you think.
If I’m correct, the %12 tax bracket doesn’t limit the cost of converting $10,000 to $1,200. But taxes have to be paid somewhere along the line, correct?
if you're in the 12% tax bracket and the $10K income does not bump you into the 22% bracket then you'll owe $1,200 in taxes. If you do this early in the year, you might make quarterly estimated tax payments. Since it's not a huge amount you maybe could just pay this amount when you submit your 1040 tax return and slip under the "under-payment penalty" but that depends on your specific situation.
This might happen end of year (Vanguard’s deadline is 12/29), so no potential penalty.
Statistics: Posted by tetractys — Fri Dec 08, 2023 10:23 pm — Replies 4 — Views 262