Your income must be under $100,000 in order to convert a traditional IRA to a Roth IRA. In the case of a married couple filing jointly, the $100,000 limit applies to the adjusted gross income (AGI) of the couple, not of each spouse
Moreover, the definition of AGI for purposes of the Roth IRA income limit includes taxable Social Security benefits. Then, other adjustments are made:
Some income that is normally excluded from AGI is added back in: redemption of U.S. savings bonds to pay higher education expenses; qualified adoption expenses paid by the individual’s employer; foreign earned income and housing costs.
Certain deductions normally allowed when computing AGI are not allowed for this purpose: deductions for education loan interest expenses, tuition expenses, and IRA contributions.
The amount that is included in gross income because of the conversion of a traditional IRA to a Roth IRA will be ignored.
Under a new law, any amount that is included in gross income by reason of a required minimum distribution from the participant’s IRAs won’t be counted in AGI, either. (It’s not clear whether required distributions from other types of plans or from inherited IRAs will be included or excluded.)
If you do convert a traditional IRA to a Roth IRA, all the deferred income tax will be due. After five years and after you reach age 59-1/2, all withdrawals will be tax-free.
