Got married, on IBR, and contributed to a Roth IRA but have to file separately

[stangorang]

I am a resident on a resident's salary.

I contributed $5500 to a Vanguard Roth IRA in January 2015. I got married mid 2015. Our combined income is over $225K.

My wife has loans which she refinanced with SoFi in late 2015. I have been on IBR for the past 4 years and will have a total of 6 years working for a 501(c)(3) by the end of fellowship.

 

As far as I can tell we will have to file separately because my IBR payments would increase too much if we file jointly. IBR doesn't seem to care if she is making large monthly payments as well.

 

What do I need to do with that $5500 Roth IRA contribution I made pre-marriage in early 2015? Do I call Vanguard and have it converted to a traditional IRA? I won't receive a deduction if I do so, correct? Do I do backdoor roth IRA? Just sell it (for a loss given it was almost exclusively in energy funds) and apply the funds towards a tax-advantaged retirement plan (403b) this year. I have yet to max out the 403b space in any given year.

 

 

[jfoxcpacfp]

Call Vanguard and ask to re-code it from a Roth to a TIRA (Traditional IRA). It will be nondeductible but then you can convert to a Roth IRA (i.e. backdoor Roth), so the result is the same - except you won't have $5,500 to convert.

Or you could explain to Vanguard that you do not qualify to contribute to a Roth and need to reverse it. Have it re-coded to a taxable account (or just take a check) then contribute $5,500 to a TIRA and do the backdoor Roth. If you cash out, you'll have a LTCL if the money has been invested since 1/15 with no dividends or CGs reinvested.