Backdoor Roth Pro-Rata Rule: Solve Your Conversion Tax Bill

High-income earners often find themselves locked out of direct Roth IRA contributions due to IRS income limits. The Backdoor Roth IRA strategy bypasses this limitation, allowing you to make non-deductible contributions to a Traditional IRA and convert them to a Roth. However, if you hold pre-tax IRA balances elsewhere, the **Pro-Rata Rule** triggers.

The Pro-Rata rule dictates that the IRS views all your Traditional, SEP, and SIMPLE IRAs as a single pool of assets. When you convert any portion to a Roth, the conversion is taxed proportionally based on the ratio of pre-tax to after-tax assets. You cannot choose to only convert the post-tax contributions.

Solve your conversion tax exposure below to prevent unexpected taxable income increases.

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