Can a Roth conversion trigger alternative minimum tax (AMT)?
When you convert to a Roth, you report the amount you convert as income. As a result, the additional income may trigger AMT. Most online Roth conversion calculators don’t factor AMT into their calculations—nor do they account for the AMT phaseout of itemized deductions, personal exemptions, etc. If you are subject to AMT, you might assume your marginal AMT rate is 28%. However, within the AMT exemption phase-out range ($150,000 to $415,000 for joint filers; $112,000 to $289,000 for single filers), the actual marginal AMT rate is 35%, not 28%. This is because the AMT exemption is reduced by 25 cents for each dollar of additional Alternative Minimum Taxable Income (AMTI) within the phase-out range. That means you pay 28% on an additional 25% within the phase-out range, which equals a marginal AMT phase-out range rate of 35% (28% x 25% + 28% = 35%). So, if you are subject to AMT, don’t make the mistake of automatically assuming your Roth conversion income is going to be taxed at 28%. Make
