Effect of Roth IRA conversion

organdan
Mon, 22 Feb 2010 11:20:08 +0000

Hi - I wonder if anyone knows about the effect of a Roth IRA conversion this year. My concern is for the 2011/2012 college year - how my tax return / FAFSA status will look when I file in Jan 2011.

Most people know that the income limits for Roth conversions just went away. I’ve read that the tax consequence of Roth conversions made in 2010 will be reflected in the 2011 and 2012 tax years, NOT in 2010.

That implies that no matter how much my wife and I convert this year, it would not change our 2010 AGI, or modified AGI, or whatever. It follows that any Roth conversions done in 2010 would have no effect on financial aid status for the FAFSA for '11/'12.

Of course, any 2010 Roth conversion would reduce chances of getting any aid for the 2 following years, but my concern is for '11/'12.

Can anyone confirm this? Thanks