Think You Can’t Have a Roth?
Good News! While the Tax Cuts and Jobs Act of 2017 reads as though the backdoor Roth is dead, never fear!
A Roth IRA isn’t perfect for everyone, it certainly gives a unique opportunity to have assets that grow tax free and can be distributed in retirement tax free. You forego a tax break in the current year and have a few rules applied but the pay off can be tremendous.
If you are not familiar with BackDoor Roth, it is simply contributing funds to a non-deductible IRA then in the same year or immediately, converting those funds to a Roth. If they had time to grow then you would pay a tax on that grow.
The new tax laws prohibit recharacterizing your Roth conversion (mouthful right?). That means once your convert an IRA that creates a tax issue for you, you can no longer undue the conversion to a Roth. So if you have an IRA that has been growing for years, consult with your tax preparer about the potential tax of you converting before you do it.
Not only is the backdoor Roth not going away, the tax-related Congressional committee has said the backdoor Roths are legitimate. Congress doesn’t have final say over IRS rulings but there are no statutes to the contrary.