07 Jan What happens to Senior Freeze if I do a Roth conversion?

Q. I am now old enough to file for the New Jersey Senior Freeze and saw that income limits were substantially increased for the last couple of years. I understand that items of income that are not subject to federal and state taxation must be included for purposes of the Senior Freeze application. But what about a conversion of a traditional IRA to a Roth?
— Birthday girl

A. It’s time for you to meet with a tax preparer who can take a close look at your situation.

The Roth conversion will cause your income for that tax year to go up, and that could make you ineligible for the Senior Freeze — at least for the year in which you do the conversion.

The current Senior Freeze has income limits of $150,000 for 2022 and $163,500 for 2023.

In the first year you apply, you must meet those limits and other requirements. Every year will have new income limits, and you will have to meet them, too. But if you’re getting the Senior Freeze and then have one year with an unexpected high income that puts you over the limit, you will probably lose that year’s benefit and have to start all over again.

This is where your tax preparer will come in.

A conversion to a Roth IRA, while you have to pay taxes upfront, will give you a tax-free account for the rest of your life. It could be a large savings over time. But if the conversion disqualifies you from the Senior Freeze, you could be losing more than you gain — again, over time — by doing the conversion.

Given that it seems you do not yet have a “base year,” which is the first year for which you get the Senior Freeze, skipping a year — doing the conversion and not getting the Senior Freeze — shouldn’t set you far behind unless there is a huge increase in your property tax bill.

But if you had been getting the Senior Freeze for years and would have to start from scratch, it might not be worth the move.

So give that tax preparer a call.

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This story was originally published in January 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.