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You are permitted to take the converted amount and pay the tax on half the conversion in each of tax years 20, adding no income to the 2010 return. A special rule is in place for conversions made in 2010. Starting this year, anyone is permitted to convert. Until this year, the conversion was only allowed for people whose adjusted gross income (AGI) was under $100,000. You would be required to pay the tax on the converted amount, but that money, as part of the Roth IRAs would not be subject to tax again.

One other possibility is to convert money from your Traditional to your Roth IRA.

Where can i buy turbo tax 2015 how to#

So far, weвЂ™ve reviewed how to deposit to either account. The Roth IRA has its own income limits if you are covered by a plan at work, the phase-out begins at $105,000 for single, $167,000 for married. There are no required distributions at any age. The money you deposit can be withdrawn at any time without penalty, but the growth within the account is not taxed if withdrawn after 59-1/2. You get no tax deduction for deposits, but the money can grow and is withdrawn tax-free. In a sense, itвЂ™s the opposite of the Traditional IRA. The benefit of this is that many people expect to be in a lower tax bracket upon retiring than when they were working. The withdrawals are taxed as regular income and subject to whatever marginal rate youвЂ™re in when you take that money. On the withdrawal side, you may not withdraw funds prior to 59-1/2 (with limited exceptions) and at age 70-1/2 you are required to start taking withdrawals based on your life expectancy, otherwise known as RMDs, required minimum distributions. HereвЂ™s a short video and post about boosting your refund with IRAs. This phase-out begins at $55,000 for singles, $89,000 for married.

If you have a 401(k) or similar retirement plan at work, your ability to deduct you IRA deposit may be limited depending on your income.

For those in the 25% tax bracket this means that a deposit of $5000 is only $3750 out of your pocket this year. The Traditional IRA allowed you to reduce your taxable income by making a deposit to your IRA and taking that amount as a deduction off your income for tax purposes. To understand the Roth IRA, we need to take a tiny step back and first get to know the Traditional IRA. In fact, 82 percent of taxpayers qualify for tax-deductible IRA.