What are the tax consequences of an IRA to Roth IRA conversion?

You must include in your gross income all pretax assets converted to a Roth IRA. You will not, however, be subject to the 10 percent early distribution penalty tax.

EXAMPLE:Oliver has only made deductible IRA contributions to his Traditional IRA. In 2019, Oliver decides to convert $20,500 from his Traditional IRA to a Roth IRA. Oliver will need to include $20,500 as income in 2019.

If you distribute conversion assets within five years of the conversion, a 10 percent early distribution penalty tax will apply unless you have a penalty tax exception.