Jan 16th, 2009
Please note all posts have moved to my new blog: Science and Money. Please check it out for the latest ideas.
IRA Conversion Mulligan
If you converted your IRA to a Roth early in 2008, you may want to recharacterize the Roth back into an IRA. You pay tax when you convert the IRA into a Roth. For example, if you converted $20,000 from an IRA into a Roth in January 2008, and you are in the 28% tax bracket, you would owe $5,600 in tax. If your $20,000 Roth then dropped in value to $12,000 by December, you should be saying “rats!”. If you had waited to convert it would have only cost $3,360 in tax. Even though it’s after the end of 2008, you can convert the Roth back to the IRA, and you won’t owe the tax for 2008.
IRS Pub 590 on IRAs
Affine Tips Feed
[...] are legitimate uses of recharacterization, but use them sparingly to avoid the unpleasant glower of the IRS. I think I’ll leave the [...]