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How to pay taxes
Old 05-29-2023, 11:53 AM   #1
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How to pay taxes

Im planning to do a last Roth conversion from my tIRA this year prior to finally applying for SS.
Our daily living expenses are paid from long term capital gains on stocks held in a taxable brokerage account.
Paying taxes on the conversion offers two options.
1 gross up conversion and pay taxes from Roth.
2 increase stock sales and pay from LTCG held in my brokerage account.

What do you all suggest?
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Old 05-29-2023, 11:57 AM   #2
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I paid my tax due on my Roth conversion from my taxable account - but it may depend on your particular situation.
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Old 05-29-2023, 12:11 PM   #3
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Wouldn't it be gross up conversion and pay some of it in taxes as a percentage while converting the rest to Roth

How close are you to the next tax bracket, if grossing up will get to the next bracket faster (as 100% taxable) than some LTCG that are fairly new as the taxable gain will be a smaller percentage of the amount.
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Old 05-29-2023, 12:22 PM   #4
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Quote:
Originally Posted by Sunset View Post
Wouldn't it be gross up conversion and pay some of it in taxes as a percentage while converting the rest to Roth

How close are you to the next tax bracket, if grossing up will get to the next bracket faster (as 100% taxable) than some LTCG that are fairly new as the taxable gain will be a smaller percentage of the amount.
When I was "fooling around" with my conversion on Vanguard last year, the account was not set up to have taxes withheld from the Roth; but there was an ability to have taxes withhold from the traditional IRA - although presumably OP could take money out of his Roth himself and spend it however . . .
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Old 05-29-2023, 12:40 PM   #5
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If you can pay the conversion tax without incurring any extra tax to withdraw from your taxable accounts, that is preferable because you get the full amount of the conversion into the Roth account.

If it is going to cost extra tax to withdraw from your taxable account, then it depends on "how much extra?" The general issue is described in the "Traditional plus taxable" vs. Roth section of that wiki article, and the "toolbox" spreadsheet linked there will do the math given your situation.
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