Roth Conversions with Capital Gains?
Bump - Someone must have encountered the Roth Conversions with Capital Gains issue. Best solution appears to be configuring PRC to tax CapGains as Regular Income. But sure would be more confident with 2nd opinion...
Also wondering - WHY do some of my Posts get formatted strangely??? Be darned if I can figure it out or fix - Apologies...
Set the income type to "Qualified Dividends" under Income Stream Definition and it looks like it will do what you want. It looks like selection of "Capital Gains" instead of Qualified Dividends ignores the income altogether for Roth Conversions. I don't know if that's a feature but it sounds like a bug. I suggest sending a bug report along with an export file and an explanation so Stuart can look at it and either fix it or improve the documentation.
Edit: My comment is incorrect, I tried to test @bo3b's issue, but my test case started with a carryover loss. So when I selected "Capital Gain", the program correctly used up my carryover loss and didn't affect the Roth Conversion. The program seems to be working correctly here.
Be careful to use PRC as a long-term guideline/roadmap to conversions, but dial this in at year end with a high-fidelity tax tool to make sure you don't cross into territory you want to avoid, whether it's the preferred LTCG bracket, or IRMAA/ACA extra costs. Your tax situation is pretty much definitive by early December, brokerages have published dividend info, etc. I use Holistiplan which shows all the guardrails graphically. dinkytown.net has a pretty detailed tax calculator but I'm not sure if it does this.
Thanks for the replies. Based on very simple testing -
- If modeling Income -> Other as properly taxed Cap Gain (ie. Stock Sale) then it appears Roth Conversion Tax Bracket Analysis (RCTBA) ignores (as designed) the related income.
- If, as a work-around, inflow taxed as Regular Income then RCTBA recognizes the Income and taxes accordingly which overall is not accurate for the situation.
As such, for actual Capital Gains taxed Income, neither PRC handling would seem fully correct relative to Roth Conversions within a Tax Bracket. And entering a Stock Sale under Income -> Other feature might be considered "Off Label" but also think perhaps a fairly common financial planning need.