Backdoor Roth Ira Conversion Pro Rata Rule

So you know how to do the backdoor roth ira conversion.

Backdoor roth ira conversion pro rata rule.

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. 31 is the date the ira s are valued for purposes of making the calculation. But what if you have pre tax money in your traditional ira.

This is the pro rata rule. Would the pro rata rule apply in the case where qualified pre tax contributions were deposited into. The pro rata rule comes into effect de. A taxpayer with a pre tax ira of 10 000 who does a 5 500 backdoor roth ira and then.

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. 10 of your balance is after tax funds. The pro rata rule applies even if a qualified plan is rolled over after the conversion takes place because dec. Under the pro rata rule your ira account has a balance of 100 000 50 000 40 000 10 000 100 000.

Click here for an example of the pro rata rule calculation showing. So what if you have a pre tax ira account and want to make annual backdoor roth conversions without owing extra tax. Dear joanna a quick follow up to your previous article on backdoor roth ira conversions. Converts the remaining 10 000 the following year.