Question: If I convert my traditional IRA’s in 2010 do I have the option of paying the tax in just the first year or must it be spread over the next 2 years? Thanks. Fred, Plano, TX.
Answer: When you convert a traditional IRA into a Roth in 2010 you get to choose whether to pay the 2010 tax bill in full or to include the conversion amount as taxable income in 2011 and 2012. The option to spread it out over two years is a one-time tax perk on conversions. But you don’t have to go that route.
Of course, the choice adds an additional layer of complexity. For instance, should you pay the tax tab in full or over two years depends on whether you believe the money you make off the delayed payment will offset the risk of a higher tax bill.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
