How Do I Model a Roth Conversion?

Use the dedicated Roth conversion row in the Income section of Scenario Analysis to show the impact of any conversions.

While not specifically an item on the tax return, this can be an easy way of presenting a Roth conversion proposal to a client by specifically highlighting the amount you may be suggesting that they convert from a Traditional IRA. (Note: if there is basis in the Traditional IRA, you may need to estimate the amount of the conversion that is truly taxable, as the Scenario Analysis tool cannot perform that calculation.)

As an example, this is what it would look like if we wanted to see the tax impact of a $50,000 Roth conversion. If you click on the pencil icon in the Roth conversion line, you'll be taken to the Roth Conversion worksheet, where you will be prompted to enter the conversion amount. We'll assume in this example that Taxpayer 1 is performing the conversion. 



The worksheet will indicate the incremental cost of the conversion. Under the hood, Holistiplan is calculating the tax with and without the conversion, so that we can show the cost of just the conversion itself. 

NOTE: The "Roth Explainer" Report is now available! When you enter an amount in one of the fields in the Roth Conversion Worksheet, you should see the purple Roth Explainer button show up. You can click on that to explore that report.


The amount of the conversion gets written back to the main Scenario Analysis screen, as shown below. Column 2 is our “baseline” scenario, while Column 3 shows our entry for the conversion.





You can read more about modeling Roth conversions, including how to incorporate the "Solve for Max" and "Range Calc" features to help as you analyze how much of a conversion may be appropriate by visiting our article here