I’m interested in converting a traditional IRA into a Roth IRA and want to know if taxes are due at time of the rollover. Currently, I have $95,566 in a traditional IRA and would like to roll over $60,000 to a Roth IRA. Also, is it possible to have part of the taxes designated as a qualified charitable distribution to a not-for-profit church?
– Eloise
Strictly speaking, you can’t earmark a portion of your tax bill to be distributed to a church. But if you meet the requirements to make a qualified charitable distribution (QCD), you can reduce your tax liability by donating a portion of your IRA to a church or other charitable organization. You don’t necessarily owe the tax bill at the time of conversion, but I usually suggest paying it then. I’ll explain why below.
If you need help strategically converting your IRA into a Roth account to limit your tax bill, speak with a financial advisor.
When Is the Tax Bill Due on a Roth Conversion?
As you noted, converting money from a traditional IRA to a Roth IRA is a taxable event. You include conversions in your taxable income for the calendar year in which the conversion occurs.
To pay your tax bill properly, it helps to understand how income tax prepayments work. The IRS expects you to prepay a tax amount that closely matches your actual liability by year-end. If you fall short, you could face an underpayment penalty. For employees, these prepayments happen through paycheck withholding. If you’re self-employed or earn significant income from rentals or investments, you may need to make quarterly estimated tax payments instead.
Think of filing your tax return as a year-end reconciliation with the government. With the benefit of hindsight, you calculate your total tax liability for the year. If your prepayments fell short, you make an additional payment. If you overpaid, you get a refund.
Whether you need to make a payment at the time of conversion depends on your estimated tax liability and any prepayments already made. For that reason, I typically recommend estimating the tax bill in advance and having your financial institution withhold that amount during the conversion. This can help avoid timing issues with estimated taxes. If you’re using other savings to cover the tax in order to maximize the amount converted, I still suggest making a payment at the time of conversion.
(A financial advisor can help you plan for the taxes due on a Roth conversion. Connect with an advisor today.)
Using a QCD to Reduce Taxable Income
A QCD is an IRA distribution made directly to a qualified charity. To clarify the distinction between what you’ve asked and how a QCD can lower your tax bill, let’s illustrate two scenarios. Let’s round your balance to $100,000 for easier math, and assume you’re in the 24% marginal tax bracket.
Scenario 1: You convert $100,000 to a Roth IRA without designating it as a QCD. Your tax bill is $24,000. You cannot then designate a portion of your $24,000 tax bill to be a QCD.
Scenario 2: You distribute $20,000 from your IRA as a QCD and then convert the remaining $80,000 into a Roth IRA. Only the $80,000 is taxable, saving you nearly $5,000 in income taxes.
The key here is to understand that you cannot simply say you’d rather send what you owe in taxes to a church. However, you still have the option to donate money to a church directly from your IRA, which could lower your eventual tax bill.
(Work with a financial advisor as you plan for Roth conversions or QCDs.)
QCDs vs. Charitable Donations
There are key details to consider when determining whether a donation will reduce your tax bill—and what makes QCDs different from other charitable contributions.
It may sound crazy, but looking at a Form 1040 can actually help clarify this discussion. That said, here’s the bottom line up front:
- Charitable donations count as an itemized deduction, meaning they only reduce your tax bill if your total itemized deductions exceed the standard deduction.
- Rather than being deducted, QCDs are excluded from your income entirely. As a result, QCDs can reduce your tax liability even if you don’t itemize.
Now, look at Form 1040. A QCD would be reported on line 4, box 4a. Assuming no other IRA distributions, you’d put 0 in box 4b. Look down at line 11—this is where you add up everything to find your adjusted gross income (AGI). The very next line, 12, instructs you to list either the total of your itemized deductions or the standard deduction. You’ll then subtract that from your AGI to find your taxable income.
The standard deduction in 2025 is $15,000 for single filers and $30,000 for married couples. Your itemized deductions need to be more than those amounts or you don’t actually get a tax break for making a donation. If your itemized deductions don’t exceed the standard deduction but you regularly give to your church, you may want to consider bunching donations.
If you make a donation for a tax break, just remember you’re lowering your taxable income, not reducing your tax bill dollar for dollar. (And if you need help planning for taxes, consider finding a financial advisor with tax expertise.)
Bottom Line
Charitable donations don’t reduce your tax liability on a dollar-for-dollar basis, but utilizing QCDs and donations can help lower your taxable income. Whether or not you need to make a tax payment at the time of the conversion depends on your total withholdings or estimated payments, and what your final tax liability for the year ends up being.
Tax Planning Tips
- A financial advisor with tax expertise can help you optimize your financial plan for tax efficiency. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- You can give up to $19,000 per recipient in 2025 without using your lifetime gift and estate tax exemption ($13.99 million). Gifting can lower future estate taxes and shift income-generating assets out of your estate.
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Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article. Some reader-submitted questions are edited for clarity or brevity.
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