Social Security Affected by Roth IRA Conversions
Published in Rules
If you’re thinking about converting your Traditional IRAs into Roth IRAs, paying the taxes, and then watching your earnings grow tax free, great! If you’re also taking Social Security benefits, you might want to take a step back and talk to a professional tax accountant before you do that conversion.
When you convert a Traditional IRA into a Roth IRA, you declare that converted value as income. As you probably now know, that income can affect your Social Security benefit payout for the year. If your total worldwide income, including tax-exempt income and half of Social Security, exceeds a certain amount, then your Social Security benefit may be subject to taxes.
For Single filers and Head of Household, the first level is at $25k. For Married Filing Jointly, the first level is at $32k. If your total income, including tax-exempt and half of SS, then 0% of your benefit is taxed. If, as a Single or HoH, you earn between $25k and $34k ($32k and $44k for MFJ), then you will pay taxes on 85% of your SS benefit. If you earn more than $34k (or $44k), then 85% of your SS benefit is taxable.
It’s something to factor in if you are considering converting your IRAs.