The end of the Roth conversions?

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The end of the Roth conversions?

Post by GT » Thu Sep 30, 2021 10:32 am

How a middle-class retirement plan became a tax dodge for the rich

https://www.cbsnews.com/news/roth-ira-b ... avoidance/

The end of the Roth conversions?
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Re: The end of the Roth conversions?

Post by GT » Thu Sep 30, 2021 1:33 pm

MangoMan wrote:
Thu Sep 30, 2021 11:17 am
GT wrote:
Thu Sep 30, 2021 10:32 am
How a middle-class retirement plan became a tax dodge for the rich

https://www.cbsnews.com/news/roth-ira-b ... avoidance/

The end of the Roth conversions?
It was only that way bc the idiots that wrote the law made it so, and it could have been fixed at any time but they chose not to do so. I'm not sure why they thought it was a bad idea to let high earners contribute to a Roth anyway. The IRS gets their tax money up front, and it keeps their marginal rate higher.
I was thinking the same -
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Re: The end of the Roth conversions?

Post by Kriegsspiel » Thu Sep 30, 2021 7:04 pm

I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.
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Re: The end of the Roth conversions?

Post by Tortoise » Thu Sep 30, 2021 7:47 pm

Kriegsspiel wrote:
Thu Sep 30, 2021 7:04 pm
I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.
I don't even think many people were mad about that. It's just Dem politicians doing what they do best, finding random excuses to increase taxes on large fractions of the American population.
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Re: The end of the Roth conversions?

Post by vnatale » Thu Sep 30, 2021 8:09 pm

Tortoise wrote:
Thu Sep 30, 2021 7:47 pm

Kriegsspiel wrote:
Thu Sep 30, 2021 7:04 pm

I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.


I don't even think many people were mad about that. It's just Dem politicians doing what they do best, finding random excuses to increase taxes on large fractions of the American population.


Where does everyone stand on the $10,000 limitation for deductions for taxes (primarily real estate & state income) on the Schedule A?

Where do you stand on whether or not mortgage interest should be deductible?

Charitable contributions being deductible?

It'd be a far simpler tax return if none of them were deductible?
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Re: The end of the Roth conversions?

Post by whatchamacallit » Thu Sep 30, 2021 9:28 pm

vnatale wrote:
Thu Sep 30, 2021 8:09 pm
Tortoise wrote:
Thu Sep 30, 2021 7:47 pm
Kriegsspiel wrote:
Thu Sep 30, 2021 7:04 pm
I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.
I don't even think many people were mad about that. It's just Dem politicians doing what they do best, finding random excuses to increase taxes on large fractions of the American population.
Where does everyone stand on the $10,000 limitation for deductions for taxes (primarily real estate & state income) on the Schedule A?

Where do you stand on whether or not mortgage interest should be deductible?

Charitable contributions being deductible?

It'd be a far simpler tax return if none of them were deductible?
I would be fan of simpler.

Just have large standard deductions. Then flat rate after that no matter the source.

Obviously it will never happen. Politicians love to complicate it with incentives.

The state and local tax deduction is a really bad one because it discourages state competition to keep taxes lower.
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Re: The end of the Roth conversions?

Post by Tortoise » Fri Oct 01, 2021 3:04 am

Ditto on favoring simpler. The current tax code is way too complex.
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Re: The end of the Roth conversions?

Post by SomeDude » Fri Oct 01, 2021 7:40 am

If charitable contributions were not just deductible but instead dollar for dollar credits......the only people in poverty in the US would be their by choice. Welfare could be eliminated overnight along with 90% of the redistribution schemes.
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Re: The end of the Roth conversions?

Post by barrett » Fri Oct 01, 2021 8:18 am

Tortoise wrote:
Thu Sep 30, 2021 7:47 pm
Kriegsspiel wrote:
Thu Sep 30, 2021 7:04 pm
I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.
I don't even think many people were mad about that. It's just Dem politicians doing what they do best, finding random excuses to increase taxes on large fractions of the American population.
Is it possible that Kriegs slipped up and mistakenly referred to politicians as people? O0

But, seriously, a lot of investors load their Roth accounts up with their most speculative assets, even if that only means going 100% S&P 500 in there. Pugchief is also correct that Roth contributions are with money that has already been taxed.

I would at least think/hope that most people who are doing regular Roth contributions (i.e. not mega backdoor or insider penny stock contributions) will be able to continue using Roth accounts as before. Ditto for Roth conversions as that is an opportunity for the government to collect some taxes.

I could be wrong about this, but weren't IRAs (Traditional, Roth, 401(k)s, etc.) all created to deal with the problem of disappearing pensions?
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Re: The end of the Roth conversions?

Post by GT » Fri Oct 01, 2021 8:49 am

barrett wrote:
Fri Oct 01, 2021 8:18 am
Tortoise wrote:
Thu Sep 30, 2021 7:47 pm
Kriegsspiel wrote:
Thu Sep 30, 2021 7:04 pm
I don't think people are mad about Roth conversions, they're mad that Peter Thiel made a lot of money in a way that they wouldn't have done even if they'd known about it. And he won't have to pay taxes on it.
I don't even think many people were mad about that. It's just Dem politicians doing what they do best, finding random excuses to increase taxes on large fractions of the American population.
Is it possible that Kriegs slipped up and mistakenly referred to politicians as people? O0

But, seriously, a lot of investors load their Roth accounts up with their most speculative assets, even if that only means going 100% S&P 500 in there. Pugchief is also correct that Roth contributions are with money that has already been taxed.

I would at least think/hope that most people who are doing regular Roth contributions (i.e. not mega backdoor or insider penny stock contributions) will be able to continue using Roth accounts as before. Ditto for Roth conversions as that is an opportunity for the government to collect some taxes.

I could be wrong about this, but weren't IRAs (Traditional, Roth, 401(k)s, etc.) all created to deal with the problem of disappearing pensions?
I could be wrong about this, but weren't IRAs (Traditional, Roth, 401(k)s, etc.) all created to deal with the problem of disappearing pensions?

The 401K was designed as an extra for management in the beginning; as a way to tax shelter extra money. Once companies figured out it was a great way to get around high cost pensions, they (companies) began moving away from fixed income pensions and moved retirement payout risk to the employee. It is cheaper to pay in a 4% of salary to an employee than guarantee a retirement income via a pension. Wall street loved it as high fees could be applied to the mutual funds that make up the 401k offerings. I see the 401K as the reason pensions started going away .....
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Re: The end of the Roth conversions?

Post by Kbg » Fri Oct 01, 2021 10:50 am

Flat or graduated tax with no deductions of any kind and no special treatment for however your “increase” came about…e.g. wages, dividends, capital gains are all taxed the same with end of year mark to market.

Businesses…the only costs allowed are compensation of any kind and costs for materials. Every other expense, not allowed.

Of course, the above is as likely to happen as a Libertarian winning a public office… most of the legal and accounting professions don’t have a job anymore and politicians have nothing to give to their constituents economically.
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 10:59 am

Deductibility of state/local taxes, charitable gifts, and mortgage interest contributes very little in the way of complexity to people's tax returns. You just keep track of how much you give away and then put that number in a blank. Put the number from the mortgage people into a different blank on the same form. All told it's three numbers on one additional sheet. It's hardly rocket science.

Maybe there are other reasons to kill these (they were dealt a huge blow by the recent increase in the standard deduction), but making people's tax returns "far simpler" really isn't one. Especially since if it's too complicated they can always just choose not to bother and take the standard deduction.

I have to say I don't understand why you'd want to discourage people from being charitable. The high standard deduction does a darn good job of that. You have to give away a lot before you see any tax benefits.
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Re: The end of the Roth conversions?

Post by jhogue » Fri Oct 01, 2021 11:47 am

What is missing in the over-heated class rhetoric in the OP is the inescapable fact that tax-advantaged retirement accounts (401k, 403b, traditional IRAs, and Roth IRAs) have turned an enormous number of thrifty, but otherwise ordinary Americans into millionaires.

I think it is creating fear and loathing in the likes of Bernie Sanders and Elizabeth Warren. They simply can't stand the idea that you are becoming financially independent of the State.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: The end of the Roth conversions?

Post by vnatale » Fri Oct 01, 2021 12:58 pm

Xan wrote:
Fri Oct 01, 2021 10:59 am

Deductibility of state/local taxes, charitable gifts, and mortgage interest contributes very little in the way of complexity to people's tax returns. You just keep track of how much you give away and then put that number in a blank. Put the number from the mortgage people into a different blank on the same form. All told it's three numbers on one additional sheet. It's hardly rocket science.

Maybe there are other reasons to kill these (they were dealt a huge blow by the recent increase in the standard deduction), but making people's tax returns "far simpler" really isn't one. Especially since if it's too complicated they can always just choose not to bother and take the standard deduction.

I have to say I don't understand why you'd want to discourage people from being charitable. The high standard deduction does a darn good job of that. You have to give away a lot before you see any tax benefits.


How is it discouraging anyone? One should be charitable irrespective of the financial benefits of doing so.

Finally, why should others have to help finance your or my charitable contributions?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 1:11 pm

vnatale wrote:
Fri Oct 01, 2021 12:58 pm
Xan wrote:
Fri Oct 01, 2021 10:59 am
Deductibility of state/local taxes, charitable gifts, and mortgage interest contributes very little in the way of complexity to people's tax returns. You just keep track of how much you give away and then put that number in a blank. Put the number from the mortgage people into a different blank on the same form. All told it's three numbers on one additional sheet. It's hardly rocket science.

Maybe there are other reasons to kill these (they were dealt a huge blow by the recent increase in the standard deduction), but making people's tax returns "far simpler" really isn't one. Especially since if it's too complicated they can always just choose not to bother and take the standard deduction.

I have to say I don't understand why you'd want to discourage people from being charitable. The high standard deduction does a darn good job of that. You have to give away a lot before you see any tax benefits.
How is it discouraging anyone? One should be charitable irrespective of the financial benefits of doing so.

Finally, why should others have to help finance your or my charitable contributions?
It allows people to be less charitable than they otherwise would be, because it makes them pay taxes on the amount they're giving away. It's not a matter of benefiting. There isn't any benefiting to charitable donations: if you just wanted to benefit financially, you wouldn't make any donation at all.

Not being required to pay income taxes on money that you give away is not "others financing my charitable contributions".
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Re: The end of the Roth conversions?

Post by vnatale » Fri Oct 01, 2021 1:53 pm

Xan wrote:
Fri Oct 01, 2021 1:11 pm


It allows people to be less charitable than they otherwise would be, because it makes them pay taxes on the amount they're giving away. It's not a matter of benefiting. There isn't any benefiting to charitable donations: if you just wanted to benefit financially, you wouldn't make any donation at all.

Not being required to pay income taxes on money that you give away is not "others financing my charitable contributions".


Two scenarios.

Current one with deduction and one with no deduction.

You and I each contribute $1,000. We are each in the 25% tax bracket. Our out-of-pocket cost (if we get full deduction for that contribution) is only $750 since we shielded $250 in taxes. It'd be even greater if one lived in a state that gave deductions for charitable contributions (Massachusetts does not).

If no deduction then each of us have a $1,000 out-of-pocket cost.

If we had a perfect country financial system wherein all expenses are covered by all federal taxes then you and me each saving $250 each has to be paid for through taxes collected from everyone else.

There is no real grand philosophical reason for giving a deduction for charitable deductions while not giving deductions for other outgo's of money. No doubt doing so "encourages" charitable giving. Just as permitting a home mortgage interest deduction "may" encourage home ownership. But I've many times read that Canadians get no home mortgage interest deduction and their country rate of home ownership is the same as the United States.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 2:16 pm

Look at it the other way: two people each have $1,000 to give away. With the deduction, the charity gets more than $1,000 (because the person can donate more). Without it, the charity only gets the $1,000.

The grand philosophical reasons include:
* Myriad private charities solve countless local needs which the federal behemoth is incapable of handling
* People shouldn't be taxed on money they're giving away to benefit society (which in theory is the purpose of a tax in the first place)

Also, the deduction only applies to federal income tax, not to Medicare/Social Security/self-employment taxes. So it's already a meet-in-the-middle partially-taxed thing.
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Re: The end of the Roth conversions?

Post by vnatale » Fri Oct 01, 2021 2:45 pm

Xan wrote:
Fri Oct 01, 2021 2:16 pm

Look at it the other way: two people each have $1,000 to give away. With the deduction, the charity gets more than $1,000 (because the person can donate more). Without it, the charity only gets the $1,000.

The grand philosophical reasons include:
* Myriad private charities solve countless local needs which the federal behemoth is incapable of handling
* People shouldn't be taxed on money they're giving away to benefit society (which in theory is the purpose of a tax in the first place)

Also, the deduction only applies to federal income tax, not to Medicare/Social Security/self-employment taxes. So it's already a meet-in-the-middle partially-taxed thing.


Yes, the charity gets more but only at the expense of others having to pay more taxes from the taxes lost by granting the deduction for charitable giving.

Myriad private charities also operate quite inefficiently. Seems like it should up to each individual to decide who to contribute money without involving the rest of the country in participating in funding these inefficient charities. There are far more out there than the average person realizes.

You are NOT being taxed on money you are giving away to benefit society (if benefiting society is even the case for far too many charities). That would be the case if it was similar to the gift tax wherein you actually do get taxed if you give more than allowable, either on a yearly basis or for a lifetime.

You are only being denied a tax benefit which is not the same as being taxed.

Why don't we give tax deductions for more basic needs...such as a certain amount of money spent per year for food? Why do charitable contributions rate favored treatment that then require everyone in the country to share financing the lost revenues from allowing the charitable contribution deduction?

The only reason why any items are deductible on the Schedule A is because because certain lobbyists / special interests got them to be there.

Is our tax code / system supposed to serve the desires of lobbyists and special interests?

At its most basic shouldn't it simply be ...you have this much income...you pay this much in taxes?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The end of the Roth conversions?

Post by vnatale » Fri Oct 01, 2021 2:54 pm

Xan wrote:
Fri Oct 01, 2021 10:59 am

Deductibility of state/local taxes, charitable gifts, and mortgage interest contributes very little in the way of complexity to people's tax returns. You just keep track of how much you give away and then put that number in a blank. Put the number from the mortgage people into a different blank on the same form. All told it's three numbers on one additional sheet. It's hardly rocket science.



I think I'm safe in assuming you use some tax software? And, further assuming it is TurboTax?

I assume most people here also use some tax software.

I do get shocked, though, when people tell me that they still do their returns by hand.

However, it's still not so simple with the ever evolving complexity's of our tax returns. Maybe some of which you have never encountered or totally trust your tax software to properly handle.

One can encounter all these newest complexities to the Schedule A.

$10,000 limitation for the overall taxes deduction.

Limitation of annual charitable giving if it exceeds a certain amount of AGI, which depends on whether or not it is capital gains property one is donating. Exceed it and the amount gets carried over to next year.

Overall limitation on total Schedule A deductions depending upon the level of one's AGI.

I have either directly experienced all the above or seen it in others' returns.

All are much more easily handled tax software but not as easily when it was all paper and you had to continually go back to change numbers when something changed elsewhere within the return.

I run a parallel system to my tax software. I have a replica of the return set up in Excel and
I am checking line by line that my tax software is correctly handling all items in the return.


Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 3:19 pm

What we ought to do is have these things be deductible AFTER the standard deduction. Why should I have to give away $24,000/year before any of it is deductible?

And I do do my taxes by hand. Well, almost. I use Free File Fillable Forms, which is paper forms except with blanks you can fill in on the computer. It does a lot of the arithmetic for you. But it doesn't shield what's actually going on behind a bunch of questions for dummies.
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 3:21 pm

vnatale wrote:
Fri Oct 01, 2021 2:45 pm
Myriad private charities also operate quite inefficiently.
Are you saying that everything from the local, privately run Assistance League which hands out clothes for schoolchildren to the local symphony orchestra and opera company should be beholden to the federal government in the name of "efficiency"?
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Re: The end of the Roth conversions?

Post by whatchamacallit » Fri Oct 01, 2021 4:34 pm

Instead thinking about the charity deduction.

Think about having higher standard deduction to compensate.

My charitable donations don't go above standard deduction even though it is my largest deductible item.

That doesn't deter me from the donation.

I wonder how much fraud comes with so called charity donations. Clinton foundation?
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 4:37 pm

whatchamacallit wrote:
Fri Oct 01, 2021 4:34 pm
Instead thinking about the charity deduction.

Think about having higher standard deduction to compensate.

My charitable donations don't go above standard deduction even though it is my largest deductible item.

That doesn't deter me from the donation.

I wonder how much fraud comes with so called charity donations. Clinton foundation?
I don't think it should be a matter of compensating. You should get charitable deductions PLUS the standard deduction.

"Doesn't deter me from donating" -- Well that's fine, but you could then donate more if you got the tax deduction. Basically arguing against the deduction is arguing that the federal government will be a better steward of the causes you support than you will.
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Re: The end of the Roth conversions?

Post by Kbg » Fri Oct 01, 2021 6:27 pm

Here’s the bottom line on charity deductions. I love my personal charity deduction. I despise having my tax funds defacto support many causes I’m adamantly against.

Mortgage deductions…a sop to real estate. Why should those who can afford a house have it subsidized when the vast majority or renters get no such subsidy.

Are you guys libertarians or not? This one is a no brainer.
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Re: The end of the Roth conversions?

Post by Xan » Fri Oct 01, 2021 6:53 pm

MangoMan wrote:
Fri Oct 01, 2021 5:40 pm
Xan wrote:
Fri Oct 01, 2021 4:37 pm
whatchamacallit wrote:
Fri Oct 01, 2021 4:34 pm
Instead thinking about the charity deduction.

Think about having higher standard deduction to compensate.

My charitable donations don't go above standard deduction even though it is my largest deductible item.

That doesn't deter me from the donation.

I wonder how much fraud comes with so called charity donations. Clinton foundation?
I don't think it should be a matter of compensating. You should get charitable deductions PLUS the standard deduction.

I don't disagree with you, but by that logic you should also get to, say, deduct mortgage interest PLUS the standard deduction. Or any other pet project of lawmakers.
Yes, I'm arguing that the standard deduction shouldn't take away from other deductions.
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