Short term or long term Roth conversions?

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coffeecup333
Posts: 44
Joined: Wed May 17, 2017 9:00 pm

Short term or long term Roth conversions?

Post by coffeecup333 » Sat Dec 08, 2018 3:59 pm

I had roughly $3000+ sitting in a tIRA in the 2030 target retirement which I simplified and exchanged to the the total stock market index investor shares in Feb 2018. In July 2018, I converted this amount into a Roth IRA (same vgtsx shares). This was at a loss of $115.22 and know I will have to pay tax on this conversion. But is this conversion considered long term or short term since the tIRA was open for longer than a year or is this considered short term since the conversion was made in July 2018? I am in a very low tax bracket this year and figured the conversion would be worth it this year since a year like this may not come again. For future reference, does it make sense to convert at a loss, even if at a low tax bracket? I've roughly projected retirement income streams and am heavily in pre-tax investments which will have to be converted at some point to avoid RMDs.

The Wizard
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Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Short term or long term Roth conversions?

Post by The Wizard » Sat Dec 08, 2018 4:03 pm

Roth conversions are ordinary income, no LT or ST involved...
Attempted new signature...

retiredjg
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Re: Short term or long term Roth conversions?

Post by retiredjg » Sat Dec 08, 2018 4:24 pm

Money in an IRA may grow or shrink, but it does not have a "capital gain" or a "capital loss". So there is nothing that is considered a short term or long term capital gain or loss inside an IRA. That concept only applies to money in a taxable account.

You converted a certain dollar amount. That dollar amount will be taxed. It is OK to convert at a loss - you actually get to pay a little less in tax since you are taxed on the dollar amount, not the number of shares.

coffeecup333
Posts: 44
Joined: Wed May 17, 2017 9:00 pm

Re: Short term or long term Roth conversions?

Post by coffeecup333 » Sun Dec 09, 2018 9:34 pm

retiredjg wrote:
Sat Dec 08, 2018 4:24 pm
Money in an IRA may grow or shrink, but it does not have a "capital gain" or a "capital loss". So there is nothing that is considered a short term or long term capital gain or loss inside an IRA. That concept only applies to money in a taxable account.

You converted a certain dollar amount. That dollar amount will be taxed. It is OK to convert at a loss - you actually get to pay a little less in tax since you are taxed on the dollar amount, not the number of shares.
Thank you for feedback-nothing like the end of the year looming and bringing along a moment to question oneself!

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