r2i forum

I searched this forum but did not get a clear picture. Here is my question

I get around $10,000 annually as dividend from US investments both taxable accounts as well as IRAs, Roth IRA etc. For these I have to pay tax in India at the rate of 30%. I was wondering if I could transfer from Traditional IRA to Roth IRA the exact amount which will generate a US tax equal to the tax I pay in India and claim exemption for tax already paid in India.

Here is an example
Dividends = $10,000
Tax in India = $3000
Transfer from Traditional IRA to Roth (assuming 15% US tax) = $20,000.
Claim tax exemption in US for tax paid in India

kumte;635751I searched this forum but did not get a clear picture. Here is my question

I get around $10,000 annually as dividend from US investments both taxable accounts as well as IRAs, Roth IRA etc. For these I have to pay tax in India at the rate of 30%. I was wondering if I could transfer from Traditional IRA to Roth IRA the exact amount which will generate a US tax equal to the tax I pay in India and claim exemption for tax already paid in India.

Here is an example
Dividends = $10,000
Tax in India = $3000
Transfer from Traditional IRA to Roth (assuming 15% US tax) = $20,000.
Claim tax exemption in US for tax paid in India

Roth conversion is a tax strategy that is often used by foreign resident USC's whose tax-home has higher taxation compared to USA.
With a worksheet and some calculations, you should be able to move to Roth, all of your new earnings as well as a percent of the principal amount each year.

added later: There are gobs of stuff on the web if you google for it. Here is just one of them: https://thunfinancial.com/iras-roth-iras-and-the-conversion-decision-for-americans-living-abroad/

More than Roth conversion strategy I was trying to find if I could claim dtaa for tax paid on dividends and convert more

kumte;635807More than Roth conversion strategy I was trying to find if I could claim dtaa for tax paid on dividends and convert more

Money, paid in any transaction, including Taxation, has always been fungible.

I earn about 20000 usd in dividends & interest from both taxable & ira type of accounts. In India I am forced to pay 30% tax on them. Wondering if there is any provision here to save that tax or at least use that in doing Roth conversions

kumte;636412I earn about 20000 usd in dividends & interest from both taxable & ira type of accounts. In India I am forced to pay 30% tax on them. Wondering if there is any provision here to save that tax or at least use that in doing Roth conversions

By "save that tax" did you mean "shave", as in reduce your tax burden to India Income Tax ? No.
However, you can use that tax-paid to reduce the tax burden in the future.

You can USE that tax-paid in a foreign tax credit(form 1116) in US filing, and convert some IRA into Roth-IRA for reducing the taxes owed to the USA in the future when you withdraw from the retirement account. How much IRA to convert to Roth, and be tax neutral, is a simulation you can run using a worksheet. https://www.irs.gov/pub/irs-pdf/f1040.pdf <== use that form from 2015.

And see what you get for total taxes when you input U$20000 on line 9 , and X on line 15, fill out your specific case information between lines 38-47, and India-Taxes paid on page-2-line48.

Your goal is to arrive at zero on line 63 (total tax owed), by adjusting the value on line 15 (this is the amount converted from IRA to Roth)
Line 48, and your tax-rate will determine what line 15 could be.

Have at it, and report back.