Math challenged - help with IRA to ROTH conversion

**SavingBucks** · 08-27-2018, 07:05 AM

I am in California as well and am delaying conversions of the rest of our traditional IRAs until retirement in 3 years (our income will drop a few brackets). It is my understanding that conversions are taxed as ordinary income. I saw a few online tax calculators -- turbo tax has a free one for federal, and the State of California has one as well. Go to the California Franchise Tax Board for their calculator at ftb.ca.gov. However, I do not know if the federal calculator takes into account the new tax plan. You can also try this calculator for tax estimations under the new tax plan: http://taxplancalculator.com/ In our case, this calculator told us that our taxes would decrease by about $16000! Hope so! Good luck and let us know the results.

**Thrif-t** · 08-27-2018, 02:07 PM

You don't have to convert the whole amount in one year. You can break it up into subsequent years so you don't have such a big tax bill.

**safari** · 08-30-2018, 03:39 PM

Originally posted by Scallywag View Post

Does this mean we would continue to owe 9.3% in state income taxes on this conversion and about 24% federal income tax on the 260K ? This is around $62400 (of which we would have already paid $33000 through each paycheck) leaving us owing old Uncle Sam around $29400 ? And $10230 for Aunt California ?

Is this accurate math ?

This is a lot of taxes ! Help ?!

That's not how the tax brackets work. You don't pay 24% on your total income. The table below explains how to calculate the taxes. Don't forget to deduct the standard deduction from your income first, which for married filing jointly is $24,000. So if your gross income is going to be $260K, after applying the deduction, your adjusted income will be $236K. Your taxes will be $28,179 plus 24% of ($236K - $165K = $71K), or $28,179 + $17,040 = $45,216. Much better than $62,400

Married Filing Jointly

Up to $19,050	10% of taxable income
Over $19,050 but not over $77,400	$1,905 plus 12% of excess over $19,050
Over $77,400 but not over $165,000	$8,907 plus 22% of the excess over $77,400
Over $165,000 but not over $315,000	$28,179 plus 24% of the excess over $165,000
Over $315,000 but not over $400,000	$64,179 plus 32% of the excess over $315,000
Over $400,000 but not over $600,000	$91,379 plus 35% of the excess over $400,000
Over $600,000	$161,379 plus 37% of the excess over $600,000

**Scallywag** · 08-31-2018, 09:17 PM

Ah, thank you. Since we've already paid federal income taxes of $33000 through our paychecks that would leave us owing around $12K in federal taxes ?

**jIM_Ohio** · 09-03-2018, 03:51 PM

Originally posted by Scallywag View Post

I had a large old 401K that I rolled over into a traditional IRA. It was around 100K about 4 months ago and is now around 110K.

I want to convert this into a ROTH IRA.

As I am math challenged and not the sharpest knife in the drawer I am having trouble figuring out what my federal and state taxes would be on this conversion. I live in California and my spouse and I file taxes jointly.

We make around $150K together before any taxes. So our CA tax bracket for 2018 is 9.3% and federal income tax bracket for 2019 is 22%.

The 110K conversion would move us up from a total income of $150K to a total income of $260K. This appears to be the 24% federal income tax bracket and the same state income tax bracket.

So here's the (obvious) question (don't laugh !!) :

Does this mean we would continue to owe 9.3% in state income taxes on this conversion and about 24% federal income tax on the 260K ? This is around $62400 (of which we would have already paid $33000 through each paycheck) leaving us owing old Uncle Sam around $29400 ? And $10230 for Aunt California ?

Is this accurate math ?

This is a lot of taxes ! Help ?!

Do NOT convert if it increases your marginal bracket do one of these 3 alternatives

1) leave money as is- wait for another opportunity (for example a down year)
2) convert only enough which keeps you in same marginal bracket http://fairmark.com/general-taxation/reference-room/
3) spread conversion out over multiple years to avoid increasing marginal taxes on conversion

**Scallywag** · 12-24-2018, 11:06 AM

Bumping this thread up for help with math AGAIN.

Will we owe state income taxes on Traditional to ROTH IRA conversions ?

**LivingAlmostLarge** · 12-24-2018, 04:52 PM

yes you will owe and no i dont' want to do the math

**Like2Plan** · 12-25-2018, 04:06 AM

Originally posted by Scallywag View Post

Bumping this thread up for help with math AGAIN.

Will we owe state income taxes on Traditional to ROTH IRA conversions ?

Tax software is now available for 2018--so you could do a quick run through and see how it will come out.

**MonkeyMama** · 12-25-2018, 04:23 AM

Agreed with Like2Plan. Couldn't give you an accurate answer without asking you 100+ questions. Taxes are way too complicated. The more income you have, the more deductions phase out, etc.

On the plus side, you won't be penalized for just paying the rest on April 15th. As long as you paid 110% of your last year taxes, you don't get penalized if you owe a ton in a one-off year. So run through the software in the next month or so, and then you have some time to prepare to pay the balance in April.

Did you already do the conversion? It would make more sense to do this after a substantial stock market drop and/or when you were not going to be stuck paying a bajillion in taxes. During a year of unemployment or disability, or early retirement, etc. When you have a $150k income year, is not the year to do a conversion, unless you expect to always make 150k+ for the rest of your life.

**MonkeyMama** · 12-25-2018, 04:32 AM

I posted a link that explains the safe harbor/110% rule. I was trying to find something more basic that tells you to check line 66 on your last year's tax return and multiply by 110% to see how much tax you have to pay in now to avoid penalties in 2018. It's line 66 for Federal and line 64 for CA. If you've already withheld 110% of these numbers, you can worry about the balance later.

Page not found - Ketel Thorstenson - CPA | Advisors

https://ktllp.com/2017/05/estimated-tax-payments/

Math challenged - help with IRA to ROTH conversion