You will have to include only the regular 401k distribution (not the Roth 401k) in your income. The default for the IRS will be to include one-half in 2011 and one-half in 2012. You will pay the tax on this income at the tax rates for those years. If you think your tax bracket will be lower in 2010, you can elect to include all of this income on your 2010 tax return.
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Please feel free to Reply if you need additional information.
I currently make $89,000 and live in Illinois.
Can you please tell me what my total tax rate is for 2010?
If I wanted to pay taxes on the $12,500 in 2010, can I calculate the tax I owe simply by multiplying $12,500 by the total tax rate you provide for 2010?
Thanks for your help!
If you are Single, take the standard deduction, and have no dependents, then most of the $12,500 will fall in the 28% bracket.
Your tax bracket is based on your taxable income, which is your gross income less deductions and exemptions.
So, for if you report the conversion in 2010, you will have $3,500 in additional taxes.
If you are married, the tax rate will most likely be 25%.
You will also need to pay your state income tax.
Once you are married, you must file as married for the whole year (2010), either jointly or separate. In most cases, the tax is lower if you file Joint.
If your wife has significant income, this may push you into a higher tax bracket for your distribution.
Hopefully Congress will extend the current tax rates to the next couple of years. Then you will be able to make an informed decision about what year or years to pay the tax.