After months of back and forth between members of Congress, progress is being made on the Administration's sweeping economic plan, President Biden recently signed the traditional infrastructure bill into law and Congress is now contemplating the social safety net programs included in the Build Better Back Act. Since being introduced, many components of that bill's original funding framework have been changed, tweaked or eliminated. For example, it appears that proposals to increase ordinary income and capital gains tax rates are now off the table. Changes to the estate and gift tax exemption amounts and grantor trust rules have also been scrapped, along with a list of other proposals.
Still included in the Build Better Back Act, however, are proposed changes governing Roth conversions. Below, TIAA wealth planning experts Jonathan Fishburn and Colleen Carcone, CFP® share their insight on steps you can take before year end to help manage your tax exposure.
Certain Roth provisions impact all taxpayers
Proposed elimination of conversions for after-tax dollars in traditional IRAs and employer-sponsored plans
Jonathan Fishburn, Director of Wealth Planning Strategies at TIAA, points out that the new legislation includes two important proposed changes for Roth conversions. The first eliminates all conversions of after-tax IRA and qualified plan contributions, effective January 1, 2022, regardless of the taxpayers' income level.