Question: I have exceeded the ability to make a Roth IRA contribution this year. Is it still possible to make Roth IRA contributions from an employer-sponsored retirement plan under the TCJA (new tax act)?

Answer: Clients who are ineligible to make Roth IRA contributions, because they have too much income, often can effectively still do so through the “back door” by contributing funds to a traditional IRA or 401(k) plan, then converting the funds to a Roth IRA. Some questioned whether this tactic would be available under the Tax Cut and Jobs Act. It is still available.

Since 2010, there has been no income limit on eligibility to convert a traditional IRA into a Roth IRA. There is no limit on the amount that can be converted to a Roth IRA. So, by contributing funds to a traditional IRA or 401(k) first, then moving the funds to a Roth IRA, it is possible to get around the contribution limits to the Roth IRA.

Comment: Stanley, 53, is employed and has income too high to make direct contributions to a Roth IRA. However, he can make contributions to his traditional IRA of up to $6,500 per year (for age 50 and older) and then convert the funds to a Roth IRA. Thus, he can move $6,500 into a Roth IRA every year, indirectly.

Much larger Roth contributions may be available to persons who participate in 401(k) plans that allow in-service rollovers to IRAs while working.

As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.

ABOUT STEVE SHANE

sshane@offitkurman.com | 301.575.0313

Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates.

ABOUT OFFIT KURMAN

Offit Kurman is one of the fastest-growing, full-service law firms in the Mid-Atlantic region. With over 140 attorneys offering a comprehensive range of services in virtually every legal category, the firm is well positioned to meet the needs of dynamic businesses and the people who own and operate them. Our eleven offices serve individual and corporate clients in the Virginia, Washington, DC, Maryland, Delaware, Pennsylvania, New Jersey, and New York City regions. At Offit Kurman, we are our clients’ most trusted legal advisors, professionals who help maximize and protect business value and personal wealth. In every interaction, we consistently maintain our clients’ confidence by remaining focused on furthering their objectives and achieving their goals in an efficient manner. Trust, knowledge, confidence—in a partner, that’s perfect.

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