Defer income to 2018?

[Todd Willhoite]

Can I defer income to 2018 where the tax brackets are more favorable than 2017 by doing the following strategy? I don't want to tie any more money up in tax deferred accounts, but if I make a deposit to my sep-ira or simple-ira for 2017 and then in 2018 roll it into my roth ira I will get to deduct the contribution on 2017 taxes and pay income taxes on the same amount in 2018, right? But then can I withdraw the deposit from my Roth IRA without penalties? (I am under 59 1/2 years of age. My existing Roth is only 1 year old.)

[Mark S.]

@Todd Willhoite,

This is the best article/blog post I’ve ever seen on they topic by a very reliable source:

https://www.kitces.com/blog/understanding-the-two-5-year-rules-for-roth-ira-contributions-and-conversions/

Look at the section about conversion rules and the intention of the conversion rules.  

Short answer to your question is 5-year waiting period on conversion PRINCIPAL if you’re under 59.5.  The idea is to prevent people from doing what it appears you’re trying to do.