Discussion:The non-deductible IRA strategy negation . . .
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Discussion Forum Index --> Basic Tax Questions --> The non-deductible IRA strategy negation . . .
Discussion Forum Index --> Tax Questions --> The non-deductible IRA strategy negation . . .
| 11 March 2008 | |
| All this talk about high incomers doing non-deductible IRAs over the next few years then converting it to a ROTH when the $100000 AGI ceiling law is removed.
Only for high incomers who do NOT have a SEP, SIMPLE, OR TRADITIONAL IRA! Right? Say the fair market value of your SEP-IRA is $100K today. Now you open an IRA, put the maximum contribution in for the next four years, deduct NONE of it because of the $100K ceiling rule. In four years your SEP-IRA is worth, say $120. And your regular IRA is worth, say $25000. If you take out this $25000, 120/145 of it will be taxable. Am I missing anything here? You can convert, but you have to pay tax on 120/145 of $25000. Hmmmm. | |
| 11 March 2008 | |
I don't know about the SEP or SIMPLE IRA's....but for traditional IRA's you are right on
target....If you are giving to non-deduct IRA's...you have to be careful what other IRA's clients have....because in 2010, as always, you can't cherry pick which IRA's you want rolled over into a Roth. | |
| 11 March 2008 | |
| Yep. And what I can tell, SEPs and SIMPLEs are in the same bucket with TRADITIONAL (DEDUCTIBLE) IRAs. | |
| 11 March 2008 | |
| I'm glancing at 8606 and I think you are correct. For the removal of hte 2010 ceiling, I've been recommending non-ded IRA's to my clients who don't have any or have little money in traditional IRA's...it didn't occur to me to enter SEP and SIMPLE into the equation.
Fortunately, none of my referrals have the SEP or SIMPLE...but thanks for bringing this up. | |
Death&Taxes (talk|edits) said: | 11 March 2008 |
| I thought I read that some would roll the SEP into a 401K to avoid this problem. | |
| 11 March 2008 | |
| I read something like that also...we're see if can rollover traditional IRA's into a 401k....so that all is left with your IRA's is non-deductible ones. | |
| 11 March 2008 | |
| Hmmm. You can roll a SEPIRA into a 401K? Let me know where you read this. I would sure like to see it. This could work for a client of mine. | |
Death&Taxes (talk|edits) said: | 11 March 2008 |
| I know this issue has been discussed in this forum, but I am unclear about the SEP. | |
| 11 March 2008 | |
I never knew you could do this, but I ready this in the Tax Strategist. First off, I guess you have to check with the 401k if the plan allows for this...second off, good idea to check if I am right about this b/c I've never done it...and I'm not very certain about it...I just remember
reading the article and thinking wow ..that's interesting. | |
