Craig Wear, CFP®Craig Wear, CFP® | Expert in Roth Conversions & Tax-Efficient Retirement Strategies for IRA Millionaires

Capital gains tax advantage explained

16 Apr 2025 · 1 min

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Short excerpt from a YouTube video by Craig Wear, CFP® explaining how capital gains tax considerations affect people who have significant assets outside their IRAs and who will use those assets to pay taxes when performing Roth conversions. He asserts that paying capital gains tax (typically up to 20% in his example) on outside assets to fund conversions is generally preferable to withdrawing from an IRA and paying ordinary income tax, and that this advantage supports doing Roth conversions for suitable candidates.

Chapters

But the capital gains thing becomes relevant for those of you who have significant assets outside of your IRA that you're going to be using to pay the taxes as you do the conversions. Now it's pretty much locked in that those capital gains rates are not going to change, that you're going to still be able to do that. And a lot of people ask us, well, gosh, if I've got to pay capital gains to get something converted, is it worth it? And my I mean, the math says absolutely, if you're a good candidate for conversions, you're much better to take it out of those assets where you only pay at the most a 20% capital gains tax than to pay ordinary tax and taking it out of the ira. So that's maybe deeper in the weeds than you want me to go on this, but I think that's a good thing and that's how it impacts where we are with Roth conversions.