The case for converting a SDIRA to a Roth SDIRA

[Erik Kubec]

Hello folks,

I am a novice investor with one property held in a traditional SDIRA. 2 bed condo with a purchase price of $35k, paid for entirely in IRA cash. I have put an additional $12k into the rehab of it, and am unclear how much of this should go into increasing its value.

I realize there are significant tax implications to this question when considering the question of converting to a roth IRA. If my $12k of rehab increased the value of the property to only $40k, then essentially that $7k difference doesn't have to pay the conversion tax.

I also realize that there are a lot of reasons why not to do it, and am welcoming those.

So here goes: I had a conversation with my father (aged 75) who is pulling $$$ out of his IRA. However, because he has done well financially, he is not in the lowest tax bracket. Thus the whole idea of deferring tax liability until you are old and poor is limited the more successful you are.

The other end of the equation is what tax bracket I am in now and what is the difference between this and what I expect to be in when I reach IRA retirement age (25 years from now).

Thoughts?