WebMar 22, 2024 · Since a Backdoor Roth conversion involves withdrawing Traditional IRA funds and transferring them to a Roth IRA, the Pro-Rata rule applies. Let me explain this further. When you do a backdoor Roth you have to look at all the pre-tax IRA assets you have (Traditional IRA, SEP IRA, etc.) to figure out how much is taxable. WebMay 4, 2024 · Pro-rata calculation =. total after-tax money in all IRAs ÷ total value of all IRAs x amount converted. Let’s assume a tax payer makes three $6,000 non-deductible …
Isolating IRA Basis For Tax Efficient Roth IRA Conversions - Kitces
WebOct 7, 2024 · The second type of Roth conversion involves using a traditional IRA as a conduit to bypass the strict income limits on Roth … WebRoth Conversion Calculator Methodology General Context. The Roth Conversion Calculator (RCC) is designed to help investors understand the key considerations in evaluating the … food allergy notice template uk
After-Tax IRA Contributions and the Pro-Rata Rule
WebSep 28, 2024 · For the Roth Conversion step when performing a Backdoor Roth contribution, the pro-rata rule says that all IRAs are treated as one IRA. This means that any funds converted to Roth will be taxed proportionally according to the amount of pre-tax and non-deductible funds subject to the conversion, incurring the risk of double taxation. WebApr 18, 2024 · The pro rata rule stipulates how the Internal Revenue Service will treat pretax and after-tax contributions when the client does a Roth conversion. Contributions to … WebNov 29, 2024 · Based on these percentages, the pro-rata rule dictates that every withdrawal or conversion will include a proportionate amount of pre-tax and after-tax dollars. As such, Teddy’s Backdoor Roth conversion of $7,000 in not all after-tax. It is 93% pre-tax and 7% after-tax. This results in a split of $6,510 taxable dollars and $490 after-tax ... food allergy numbness