Why am I taxed when I already paid tax on this money?

The pro rata rule treats every dollar converted as a proportional mix of pre-tax and after-tax money across all your IRAs. You cannot elect to convert only the after-tax portion.

How do I make it tax free?

Have no pre-tax IRA balances at year end. Rolling them into an employer plan works, because employer plans are outside the aggregation.

InvestmentretirementUnited States only

Backdoor Roth Calculator

Backdoor Roth with the pro rata rule applied. The strategy is only tax free when you hold no other pre-tax IRA money, and the rule aggregates every traditional, SEP and SIMPLE IRA you own.

Also called: pro rata rule calculator, backdoor roth tax.

Tax on the conversion

$1,938.46

$1,938.46 of tax on a conversion that many expect to be free. The pro rata rule treats 86.54% of the conversion as pre-tax, because the IRS looks at all your IRA balances together and not just the money you moved. Rolling the 45000 of pre-tax balances into an employer plan before year end would make the conversion tax free.

Share treated as pre-tax

86.54%

Taxable portion

$6,057.69

Tax-free portion

$942.31

All IRA balances combined

$52,000.00

Basis left for later

$6,057.69

On making it clean

Rolling the 45000 of pre-tax balances into an employer plan before year end would make the conversion tax free.

How this is calculated

Computed from the published rates for the tax year you selected, which is not necessarily the current year. A calculation, not tax advice, and it does not know anything about your circumstances beyond the figures entered.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for United States change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

A backdoor Roth means contributing to a traditional IRA without a deduction and converting it. It is tax free only if you hold no pre-tax IRA balances, because the pro rata rule computes the taxable share from all your IRA balances combined rather than from the money you actually converted. Holding a large rolled-over IRA therefore makes the strategy expensive. The usual remedy is rolling those balances into an employer plan first, since employer plans are outside the aggregation.

the pro rata rule aggregates every traditional, SEP and SIMPLE IRA you hold

B: Balances

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a backdoor Roth with existing pre-tax money

Non-deductible contribution: $7,000.00
Existing pre-tax IRA balances: $45,000.00
Existing after-tax basis: $0.00
Marginal rate: 32%

Tax on the conversion$1,938.46

45,000 of 52,000 is pre-tax, so 86.54% of the conversion is taxable

Open this example

no pre-tax balances makes it free

Non-deductible contribution: $7,000.00
Existing pre-tax IRA balances: $0.00
Existing after-tax basis: $0.00
Marginal rate: 32%

Tax on the conversion$0.00

boundary: the case the strategy assumes

Open this example

Method and limits

What it assumes

Balances measured at 31 December of the conversion year, which is what the rule uses.

What it deliberately does not model

Roth 401(k) and employer plan balances are outside the aggregation.
The rule uses year-end balances, so timing a rollover after the conversion does not help.
This is an estimate, not tax advice.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Why am I taxed when I already paid tax on this money?: The pro rata rule treats every dollar converted as a proportional mix of pre-tax and after-tax money across all your IRAs. You cannot elect to convert only the after-tax portion.
How do I make it tax free?: Have no pre-tax IRA balances at year end. Rolling them into an employer plan works, because employer plans are outside the aggregation.