With tax season just around the corner, many people are looking for ways to lower their tax bill. One interesting option is the Roth conversion, and TurboTax’s What-If Worksheet can help you navigate this process.
The first thing to understand is the difference between a traditional IRA and a Roth IRA. Traditional IRAs allow you to deduct contributions on your tax return, but you pay taxes on the money when you withdraw it in retirement. Roth IRAs, on the other hand, don ’t give you a tax break upfront, but qualified distributions are tax-free.
A Roth conversion allows you to move money from a traditional IRA to a Roth IRA. This can be a smart move if you think your tax rate will be lower now than in retirement. However, there are some tax implications to consider. You’ll have to pay taxes on the amount you convert, which can be a significant financial hit if you’re not prepared.
That’s where TurboTax’s What-If Worksheet comes in. This tool allows you to play around with different scenarios and see how they affect your taxes. You can input your income, deductions, and other relevant information to see how a Roth conversion would impact your bottom line.
Of course, every situation is different, and you should consult a financial advisor before making any big moves. However, the TurboTax What-If Worksheet can be a helpful tool to understand the potential benefits and drawbacks of a Roth conversion.
The bottom line: if you’re looking for ways to lower your tax bill, a Roth conversion may be worth considering. The TurboTax What-If Worksheet can help you understand the tax implications and determine if it’s the right move for you.
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