How Taxes on Roth Conversions Are Paid
Which account does WealthTrace use to pay the taxes generated by a Roth conversion, and can I choose which account is used?
When WealthTrace calculates taxes resulting from a Roth conversion, those taxes are treated as an expense within the plan.
Currently, WealthTrace pays those taxes in the following order:
- Taxable investment accounts - funds are taken from taxable accounts in the same order they would normally be used to pay other expenses.
- The IRA being converted - if there are no taxable funds available, WealthTrace will use funds from the IRA being converted to cover the taxes.
Upcoming Improvements
We are planning two improvements for Q1 2027 that will provide more visibility and control over how Roth conversion taxes are funded:
- The ability to see exactly which account is being used to pay the taxes.
- The ability to specify which account should be used to pay those taxes.
Once these features are available, this article will be updated with instructions for using the new settings.