Hi,

This is an interesting question. I think the easier answer is to start with the SEP contribution. If your wife contributes to a SEP, then she will considered covered under a retirement plan of the year. With income of $300k, that will make both of your $5k IRA contributions as non-deductible, which will reduce your tax bill when you convert.

If she doesn't contribute to a SEP, then I think your $10k contributions will be deductible as an adjustment to income on your federal tax return. When you covert, you will then report that $10k as income on the IRA distribution line. Since the $10k of income will be offset by the $10k of deduction, it will be as if the IRA contributions were non-deductible. Please note that this will only work out like this if you make the deductible IRA contribution and convert it to a Roth IRA for the same tax year.

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