I will make 40K this year and nothing next year. If I go full traditional IRA and convert them to Roth next year, it seems like I save 1K in taxes. Is it really that easy?

Or am I not understanding tax rules?

Next year I will be in school and have almost no income. This year I will make close to 40K, which will put me in the 12% bracket. (Honestly that's really low lol)

If I go Roth, I dump the $5500 in the retirement account. End of story

If I go Traditional, I technically made $5500 less, so I should get $5500 * (12% federal + 5% state) = $935 back from the government during tax returns. Next year I make the conversion to Roth, which means I have an extra $5500 in income that year, but that will be the bulk of my income, under the standard deduction, so it's not taxed. This means I save $935 in taxes but still ends up with $5500 in a Roth account.

Is there a catch somewhere I should be aware of?

Submitted August 13, 2018 at 07:26AM by OkMechanic7 https://ift.tt/2w0wS1G