1. Taxpayers have special favorable tax attributes, including a high basis ratio, charitable deduction carry-forwards, investment tax credits, net operating losses
(NOLs), etc. This is because these attributes reduce the effective tax rate of the conversion.
2. Suspension of the minimum distribution rules at age 70½ provides a considerable advantage to the Roth IRA holder. This allows for additional tax-free deferral.
3. Taxpayers benefit from paying income tax before estate tax (when a Roth IRA election is made) compared to the income tax deduction obtained when a
traditional IRA is subject to estate tax. This is because the IRC § 691(c) deduction is inefficient.
4. Taxpayers who can pay the income tax on the IRA from non-IRA funds benefit greatly from the Roth IRA because of the ability to enjoy greater tax-free yields.
This is because of the ability to move funds from a “taxable” to a “tax-free” tax asset class.
5. Taxpayers who need to use IRA assets to fund their Unified Credit bypass trust are well advised to consider making a Roth IRA election for that portion of their
overall IRA funds. This is because the exemption is funded on an after-tax basis.
6. Taxpayers making the Roth IRA election during their lifetime reduce their overall estate, thereby lowering the effect of higher estate tax rates.
7. Because federal tax brackets are more favorable for married couples filing joint returns than for single individuals, Roth IRA distributions won’t cause an
increase in tax rates for the surviving spouse when one spouse is deceased because the distributions are tax-free.
8. Managing the 199A pass-through business deduction taxable income based limitations. Converting to avoid RMDs, for example, may help a taxpayer maximize
9. Tax rates are historically low. Higher tax rates in the future means more tax will be paid on taxable IRA distributions than the tax that would be paid on a
conversion at a lower rate.
10. 3.8% Net Investment Income Tax. A conversion may be beneficial for taxpayers because qualified Roth IRA Distributions are neither NII nor MAGI.