Unprecedented 2018 Roth IRA Conversion Opportunities

A For Sale sign showing Roth IRA Conversions For Sale

The 2018 Tax Cuts, Jobs Act of 2017 and Roth IRA Conversions

At first glance, the Tax Cuts and Jobs Act of 2017 would have seemed to reduce the desire for individuals to make Roth IRA conversions for the 2018 tax year and beyond because of the inability to recharacterize Roth IRA conversions as non-conversions by your tax return filing date.  However, the historic low tax rates created under the Tax Cuts and Jobs Act of 2017 only last under current law through 2025 so many taxpayers have been willing to take the risk that the market could decline and have been converting their IRAs to Roth IRAs. The creation of the 22% and 24% tax brackets for 2018 effectively replacing the 25% and 28% tax brackets for 2017 along with an elongation of the tax brackets in 2018 have made a compelling case for Roth IRA conversions.

Roth IRA Conversions – The Benefits of Being Married and Filing Jointly

For example, suppose that you are married filing jointly and had $100,000 of taxable income in both 2017 and 2018.  Further, suppose that you were comfortable making a conversion if your marginal tax rate did not exceed 25%.  In 2017, you could make a $53,100 conversion at 25% and then the next dollar would be taxed at 33%.  In 2018, you could convert $65,000 at a 22% rate and then another $150,000 at a 24% rate.  In this example, a married filing jointly taxpayer can convert an additional $161,900 at a rate of 25% or less in 2018 compared to 2017.

In effect, the current tax law is the equivalence of a “tax sale” so families (grandparents, parents, children, etc.) should collaborate to reach the best strategic Roth IRA conversion answer for their family. Please do not hesitate to contact me at (412) 521-2732 x211 if you would like to discuss a coordinated Roth IRA conversion strategy for your family or;

Contact Matt Schwartz, Attorney at the Lange Financial Group for Estate Planning needs including Wills.