But reducing the amount of taxable income on your tax returns means you're showing the lender that you have less income to qualify for a loan as well.

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In a progressive tax system, that also means that the amount of tax payable will be smaller since tax rates tend to decrease with taxable income (with some exceptions, of course).

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This rule can apply where there is a relatively greater amount of indebtedness in the U.S. than offshore, and net interest expense exceeds a specified percentage of adjusted taxable income.

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But the exact amount depends on your annual taxable income, age, value of your IRA and how much it appreciates after conversion but before you have to make a decision on how much to keep as a Roth conversion.

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The idea: we can collect the same amount of revenue without creating perverse economic incentives, including the incentive to avoid realizing taxable income.

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Now for conversions: You declare all or part of a traditional IRA as taxable income now, pay federal and state tax on that amount and then convert the money into a Roth.

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