Pro Rata Backdoor Roth Calculator – Cost Calculator

Backdoor Roth Pro Rata Rule Calculator

Important: The IRS views all your Traditional, SEP, and SIMPLE IRAs as a single "bucket." If you have pre-tax money in any of these accounts, you cannot choose to only convert the "after-tax" portion. This calculator determines the taxable and tax-free amounts of your conversion.

Total Basis in Traditional IRAs (After-tax contributions)

Total Fair Market Value of ALL Traditional, SEP, and SIMPLE IRAs

(Projected value as of Dec 31st of the conversion year)

Amount to Convert to Roth IRA

Conversion Breakdown

Tax-Free Portion: $0.00

Taxable Portion: $0.00

Non-Taxable Percentage: 0%

Note: The taxable portion will be added to your ordinary income for the current tax year.

Understanding the Pro Rata Rule in Backdoor Roth Conversions

The "Backdoor Roth" is a popular strategy for high-income earners to contribute to a Roth IRA when they exceed the direct contribution limits. However, many taxpayers fall into the Pro Rata Rule trap, which can result in unexpected tax bills.

How the Pro Rata Rule Works

The IRS considers all your non-Roth IRAs (Traditional IRA, SEP IRA, and SIMPLE IRA) as a single aggregate entity. If you have any pre-tax money in any of these accounts, the IRS requires you to convert a proportional amount of pre-tax and after-tax funds. You cannot simply tell the IRS, "I'm only converting the $6,500 non-deductible contribution I just made."

The Pro Rata Formula

The percentage of your conversion that is tax-free is determined by this formula:

        (Total After-Tax Basis) / (Total Value of all IRAs on Dec 31) = Tax-Free %
    

Backdoor Roth Example Scenario

Scenario: You have $93,500 in a rollover IRA (pre-tax) from a previous employer.
Action: You contribute $6,500 to a new Traditional IRA as a non-deductible contribution (after-tax basis).
Total IRA Value: $100,000.
The Math: Your basis ($6,500) divided by the total value ($100,000) is 6.5%.
The Result: If you convert $6,500 to a Roth IRA, only 6.5% ($422.50) is tax-free. The remaining $6,077.50 is considered taxable income!

How to Avoid the Pro Rata Rule

There are two primary ways to bypass this tax headache:

The Reverse Rollover: If your current employer's 401(k) or 403(b) allows it, you can "roll over" your pre-tax IRA balances into the workplace plan. Since 401(k) balances are not counted in the Pro Rata calculation, this clears your "IRA bucket."
Empty the IRAs: Ensure you have a $0 balance in all Traditional, SEP, and SIMPLE IRAs by December 31st of the year you perform the conversion.

Reporting to the IRS

You must file IRS Form 8606 with your tax return every year you make a non-deductible contribution or perform a Roth conversion. This form tracks your "basis" so you don't get taxed twice on the same money in the future.