Backdoor Roth Ira Conversion Pro Rata Rule

10 of your balance is after tax funds.

Backdoor roth ira conversion pro rata rule. Here s more detail on the rule. This is the pro rata rule. So what if you have a pre tax ira account and want to make annual backdoor roth conversions without owing extra tax. 31 is the date the ira s are valued for purposes of making the calculation.

Converts the remaining 10 000 the following year. But what if you have pre tax money in your traditional ira. Dear joanna a quick follow up to your previous article on backdoor roth ira conversions. Any conversion done from any ira account will be deemed to consist of some pre tax funds and some after tax funds.

Would the pro rata rule apply in the case where qualified pre tax contributions were deposited into. You have several options. 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. 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. A taxpayer with a pre tax ira of 10 000 who does a 5 500 backdoor roth ira and then. The pro rata rule applies even if a qualified plan is rolled over after the conversion takes place because dec. The pro rata rule comes into effect de.