20 Dec Can I take extra from my IRA to pay Roth conversion tax?

Q. If you take out a Required Minimum Distribution (RMD) from a traditional IRA, can you also take excess money out to pay the tax if you’re converting to a Roth? Can you do the same for a beneficiary IRA — take out the RMD with extra money to pay the taxes for a conversion?
— Planning

A. Yes, you can.

And, you have options.

For starters, there are no age limits to doing a Roth conversion, said Steven Gallo, a certified public accountant and personal financial specialist with U.S. Financial Services in Fairfield.

“The only requirement is that any RMD due to be taken in the year of conversion must be done prior to the conversion,” he said.

When contemplating a conversion, you need to be aware of the amount you are taking and how it will affect your tax bracket for the year in question, Gallo said.

“Since there are no limits on how many conversions a taxpayer can make, it may be wise to spread the conversion process over multiple tax years to avoid jumping into a higher tax bracket and ultimately paying more in taxes than need be,” he said.

For example, if you are currently in a 15% tax bracket, you should determine how much additional income you could receive without jumping to the next higher bracket and limit your conversion accordingly. You can then repeat the process each tax year until you have converted the desired sum, Gallo said.

As for the second part of your question, the answer depends on your relationship to the deceased, he said.

“If you inherited the IRA from your spouse, then you can transfer the inherited funds to your traditional IRA and then convert it to a Roth from there,” he said. “However, an IRA inherited from anyone else other than a spouse can not be converted to a Roth.”

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This story was originally published on Dec. 21, 2021.

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