Backdoor Roth Ira Conversion Pro Rata Rule

Any conversion done from any ira account will be deemed to consist of some pre tax funds and some after tax funds.

Backdoor roth ira conversion pro rata rule.

The pro rata rule is used to determine the after tax amount of a roth conversion when the taxpayer has both pre tax and after tax balances in their ira s. Would the pro rata rule apply in the case where qualified pre tax contributions were deposited into. The pro rata rule applies even if a qualified plan is rolled over after the conversion takes place because dec. 31 is the date the ira s are valued for purposes of making the calculation.

So what if you have a pre tax ira account and want to make annual backdoor roth conversions without owing extra tax. Company sponsored plans like 401 k s and 403 b s are not used in the pro rata calcu lation unless rolled over to an ira in the year of conversion. Click here for an example of the pro rata rule calculation showing. Dear joanna a quick follow up to your previous article on backdoor roth ira conversions.

This is the pro rata rule. Here s more detail on the rule. You have several options. Under the pro rata rule your ira account has a balance of 100 000 50 000 40 000 10 000 100 000.

A method that taxpayers can use to place retirement savings in a roth ira even if their income is higher than the maximum the irs allows for regular roth ira contributions. So you know how to do the backdoor roth ira conversion. A taxpayer with a pre tax ira of 10 000 who does a 5 500 backdoor roth ira and then. But what if you have pre tax money in your traditional ira.