Some investors may benefit from the tax advantages of a Roth IRA. You may be eligible to convert a traditional IRA to a Roth IRA, but you will be subject to taxation for the fair market value of the amount you convert.
Tax-deductible, subject to income limitations
Annual Contribution Limits
2016: $5,500, $6,500 if 50 or older
2017: $5,500, $6,500 if 50 or older
Anyone under 70½ who has earned income
2016: Only individuals with adjusted gross income of less than $132,000 if filing as single, head of household, or married filing separately and did not live with a spouse at any time during the year; $194,000 if married and filing a joint return; $10,000 if married filing separately and you lived with your spouse at any time during the year
2017: Only individuals with adjusted gross income of less than $133,000 if filing as single, head of household, or married filing separately and did not live with a spouse at any time during the year; $196,000 if married and filing a joint return; $10,000 if married filing separately and you lived with your spouse at any time during the year
Federal Taxation on Withdrawals
Subject to income tax on earnings and deductible contributions
Distributions of contributions are tax-free and distributions of earnings are tax free if Roth IRA is held for at least five years and individual has reached age 59½; exceptions may exist if the distribution is due to death, disability, first-time home purchase, or post-secondary education
Minimum distribution required after age 70½
Individuals who convert from a traditional IRA to a Roth are subject to taxation for the fair market value of the amount converted. Sometimes individuals may experience such a decline in value of their new Roth account that their account becomes worth less than what they paid in taxes.
If this is your experience, the IRS allows you to recharacterize the amount you converted back to a traditional IRA. Essentially, you are “undoing” your Roth conversion.
The recharacterization must be completed by October 15 of the year after you converted the account. You can then file an amended tax return to receive a refund of the taxes you paid on conversion.
Contact the Shareholder Services Team at 800-432-7856, or send an email. The Team is available 8 a.m. to 7 p.m. CT, Monday to Friday.
©2017 Heartland Advisors | 789 N. Water Street, Suite 500, Milwaukee, WI 53202 | Business Office: 414-347-7777 | Financial Professionals: 888-505-5180 | Individual Investors: 800-432-7856
Neither Heartland nor any of its representatives may give legal or tax advice. For guidance on a specific situation, investors should consult their tax adviser or legal counsel.
The Heartland Funds are distributed by ALPS Distributors, Inc.