Convert non-working spouse IRA to Roth?

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Convert non-working spouse IRA to Roth?

Postby prudent » Mon Jul 01, 2013 1:25 pm

Is there ever a situation where this might make sense for a non-working spouse?
- Partially convert a Traditional IRA to a Roth IRA (no other income, convert up to the amount where taxes would kick in).
- File separately.

Working spouse is in 25% bracket. Nothing significant regarding deductions - only property tax, state/local income tax, charitable contributions.
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Re: Convert non-working spouse IRA to Roth?

Postby Alan S. » Mon Jul 01, 2013 1:57 pm

It might. The total tax bill at various conversion amounts needs to be compared using both separate and joint filing status. For the separate filings, the income and deductions need to be assigned correctly to each return based on federal and state law contemplating common law or community property state provisions.

Since 2010, Roth conversions can be done using all filing status options. Each spouse's basis from non deductible contributions should also be considered in determining which IRA is best converted, if any.
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Re: Convert non-working spouse IRA to Roth?

Postby Bob's not my name » Mon Jul 01, 2013 3:28 pm

Alan S. wrote:The total tax bill at various conversion amounts needs to be compared using both separate and joint filing status. For the separate filings, the income and deductions need to be assigned correctly to each return based on federal and state law contemplating common law or community property state provisions.
For example, if the working spouse would be in the 25% bracket filing separately, the couple would be in the 15% bracket filing joint. Also, the non-working spouse is denied a deductible spousal TIRA contribution if he files separately. I can't imagine this is a good idea, but I'm interested in seeing your math.
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