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Ask the Expert: Ask the Expert: Roth contributions vs. Roth conversions

If your Required Minimum Distribution (RMD) is more than you need, can you deposit part of it (after taxes) directly into your Roth IRA? I thought only earned income can be deposited in a Roth IRA, and that it can't exceed $7,000.

You may be confusing annual Roth contributions with Roth conversions. They're subject to different rules.

The government has waived 2020 RMDs. But in years when you must take an RMD, you can't convert any part of it to a Roth.

Let's say your RMD is $10,000. You want to deposit $5,000 of the after-tax balance into a Roth IRA. That's an annual contribution, for which you must be eligible. You must have earned income — and your Roth contribution can't exceed your earned income. You can contribute up to $7,000 if you're over 50 (up to $6,000 if you're under 50), but only if your 2020 modified adjusted gross income is less than $124,000 (single taxpayers) or less than $196,000 (married filing jointly).

If your income is greater, you may be able to make a smaller Roth contribution. But you can't make any Roth IRA contribution at all if you're single with income of $139,000 or more, or if you're married filing jointly with income of $206,000 or more.

By contrast, Roth conversions have no earned income or income eligibility requirements and no annual dollar limits. Returning to the example, let's say you can't contribute to a Roth because you have no earned income. You can still put $5,000 into your Roth as a conversion — but only after you've taken your $10,000 RMD. In other words, you must pay taxes on $15,000 — a $10,000 RMD and a $5,000 conversion.

The bottom line

You can't convert part of your RMD to a Roth IRA.

More information

TO ASK THE EXPERT Send questions to Ask the Expert/Act 2, Newsday, 6 Corporate Center Dr., Melville, NY 11747, or email Include your name, address and phone numbers. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own consultants for your specific needs.


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