Backdoor Roth Calculator
With non-deductible contribution 7500 usd, pre-tax money in all your iras 50000 usd, amount you convert 7500 usd, your tax rate this year 24 percent, backdoor roth comes to $1,565 — tax on the conversion. It is reached in 9 steps, the last of which is 6521.7391 * 24 / 100, and each one is printed on the page with its numbers filled in. The formula is the one published by IRS, not an approximation fitted to it.
What a backdoor Roth costs once the pro-rata rule counts every traditional IRA you own, and what rolling the pre-tax money into a 401(k) first saves.
Formula and sources checked · How we check
Non-deductible contribution 7500, Pre-tax money in all your IRAs 50000, Amount you convert 7500, Your tax rate this year 24
$1,565
Tax on the conversion for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.
It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.
- Everything the IRS counts as one pot
50000 + 7500$57,500- Share of that pot which is pre-tax
50000 / 57500 * 10086.957 %- Taxable part of the conversion
7500 * (50000 / 57500)$6,522- Tax-free part
7500 - 6521.7391$978.26- Tax on the conversion
6521.7391 * 24 / 100$1,565- Basis still stranded in the IRA
max(0, 7500 - 978.26087)$6,522- Tax if the pre-tax money were in a 401(k) first
$0- What the pro-rata rule costs you
$1,565- Effective tax rate on the manoeuvre
1565.2174 / 7500 * 10020.87 %
Worked example
A $7,500 non-deductible contribution against $50,000 of pre-tax IRA money is one pot of $57,500, and 86.96% of it is pre-tax. Converting $7,500 is therefore $6,522 taxable and $978 tax-free: $1,565 of tax at 24%, with $6,522 of basis stranded for a future year. Roll the pre-tax money into a 401(k) before 31 December and the same conversion costs nothing.
How to work it out yourself
- 1.Add up every traditional, SEP and SIMPLE IRA you own — the rule aggregates them, and it uses the balance on 31 December of the conversion year rather than on the day you convert.
- 2.You cannot convert only the after-tax dollars. Each converted dollar carries the same pre-tax fraction as the pot, and the leftover basis stays behind on Form 8606 for a future year.
- 3.The fix is to empty the pre-tax side first: most 401(k) plans accept a rollover in, and pre-tax money sitting in a workplace plan is invisible to the pro-rata calculation.
- 4.File Form 8606 for the contribution year even if nothing was taxable. Basis you never reported is basis you will be taxed on twice.
What the same $7,500 conversion costs, by pre-tax balance
| Pre-tax money in all your IRAs (usd) | Tax on the conversion | Share of that pot which is pre-tax | Tax on the conversion |
|---|---|---|---|
| 0 | $0 | 0 % | $0 |
| 5000 | $720 | 40 % | $720 |
| 10000 | $1,029 | 57.14 % | $1,029 |
| 25000 | $1,385 | 76.92 % | $1,385 |
| 50000 | $1,565 | 86.96 % | $1,565 |
| 100000 | $1,674 | 93.02 % | $1,674 |
| 250000 | $1,748 | 97.09 % | $1,748 |
| 500000 | $1,773 | 98.52 % | $1,773 |
The contribution and the conversion never change. The only variable is how much pre-tax money is sitting in the same pot.
The formula
- Everything the IRS counts as one pot
50000 + 7500 - Share of that pot which is pre-tax
50000 / 57500 * 100 - Taxable part of the conversion
7500 * (50000 / 57500) - Tax-free part
7500 - 6521.7391 - Tax on the conversion
6521.7391 * 24 / 100 - Basis still stranded in the IRA
max(0, 7500 - 978.26087) - Tax if the pre-tax money were in a 401(k) first
- What the pro-rata rule costs you
- Effective tax rate on the manoeuvre
1565.2174 / 7500 * 100
Source: IRS — Instructions for Form 8606, line 6: the total value of all traditional IRAs on 31 December, IRS Publication 590-A — nondeductible contributions and figuring the taxable part, IRS Publication 590-B — distributions, basis recovery and the ordering rules
Questions people actually ask
- What is the pro-rata rule?
- When you convert, the IRS treats every traditional, SEP and SIMPLE IRA you own as one account. The taxable share of the conversion is the pre-tax balance divided by the total — you cannot elect to convert only the after-tax dollars. Form 8606 line 6 is where the denominator comes from.
- How do I avoid the pro-rata tax?
- Move the pre-tax IRA money into a workplace 401(k) or 403(b) before 31 December of the conversion year. Employer plans are outside the aggregation, so the denominator falls to the after-tax contribution and the conversion becomes tax-free. On the figures above that turns a bill into nothing.
- Is the backdoor Roth still allowed?
- Yes. It is not written into the code as a strategy, but the conference report on the 2017 tax act acknowledged the sequence, and the IRS has not challenged it. Proposals to close it have been introduced and none has passed.
- Does a 401(k) balance count against me?
- No. The pro-rata rule counts traditional, SEP and SIMPLE IRAs only. A million dollars of pre-tax money in a 401(k) has no effect on a backdoor Roth, which is exactly why rolling an IRA into one solves the problem.
Related
- Roth Conversion CalculatorWhat converting a traditional IRA to a Roth costs in tax now, what it is worth at withdrawal, and the retirement tax rate where the two paths break even.
- Roth IRA CalculatorWhat a Roth IRA grows to, how much of that balance is growth the IRS never taxes, and what the same money would be worth in a taxable account.
- Traditional vs Roth IRA CalculatorWhich IRA leaves you more after tax, comparing the deduction a traditional IRA gives now against the tax-free withdrawal a Roth gives later.
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- RMD CalculatorThe required minimum distribution from a traditional IRA or 401(k), using the IRS Uniform Lifetime Table denominator for your age.
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