Include all Traditional, SEP, and SIMPLE IRAs. Do not include Roth IRAs or 401(k)s.
$
This is the cumulative amount of non-deductible contributions (Form 8606).
$
Pro Rata Percentage (Tax-Free):0%
Taxable Percentage:0%
Tax-Free Conversion Amount:$0.00
Taxable Conversion Amount:$0.00
Remaining After-Tax Basis:$0.00
Understanding the Pro Rata Rule for Roth Conversions
When performing a Roth conversion, especially as part of a "Backdoor Roth" strategy, the IRS Pro Rata Rule determines how much of the conversion is taxable. This rule prevents investors from only converting their after-tax (non-deductible) contributions while leaving pre-tax earnings in their Traditional IRA.
How the Pro Rata Rule Works
The IRS views all of your Traditional, SEP, and SIMPLE IRAs as one single aggregate account. You cannot cherry-pick which dollars to convert. If you have $95,000 in pre-tax IRA money and add $5,000 in non-deductible contributions, the IRS sees a pot of $100,000 where 95% is taxable and 5% is tax-free.
A common analogy is "Cream in the Coffee." Once you pour cream (after-tax money) into your coffee (pre-tax money), you cannot spoon out just the cream. Any spoonful you take out will be a mixture of both.
The Formula
The calculation is performed using IRS Form 8606. The basic formula is:
Step 1: Calculate Total IRA Value (Sum of all non-Roth IRAs + Distributions).
Step 2: Determine Total Basis (Sum of all non-deductible contributions).
Step 3: Calculate the Ratio: Total Basis ÷ Total IRA Value.
Step 4: Apply this ratio to the amount converted to determine the tax-free portion.
Example Calculation
Let's say you have an old Rollover IRA worth $44,000 (all pre-tax). You want to do a Backdoor Roth IRA, so you contribute $6,000 as a non-deductible contribution to a Traditional IRA. You then convert that $6,000 to a Roth IRA.
Total IRA Balance: $50,000 ($44,000 pre-tax + $6,000 basis).
Basis: $6,000.
Tax-Free Ratio: $6,000 / $50,000 = 12%.
Conversion Amount: $6,000.
Tax-Free Portion: $6,000 × 12% = $720.
Taxable Portion: $6,000 – $720 = $5,280.
Even though you only converted the $6,000 you just put in, you would owe income tax on $5,280 of that conversion because of the Pro Rata rule.
How to Avoid the Pro Rata Rule
The most common strategy to avoid this tax bill is to move your pre-tax IRA funds into a current employer's 401(k) or 403(b) plan, if allowed. By "hiding" the pre-tax money in a 401(k), it is removed from the Pro Rata calculation, leaving only the after-tax basis in the IRA to be converted tax-free.
function calculateProRata() {
// 1. Get input elements
var totalIraInput = document.getElementById('totalIraValue');
var basisInput = document.getElementById('totalBasis');
var conversionInput = document.getElementById('conversionAmount');
// 2. Parse values
var totalIra = parseFloat(totalIraInput.value);
var basis = parseFloat(basisInput.value);
var conversionAmt = parseFloat(conversionInput.value);
// 3. Validation
if (isNaN(totalIra) || totalIra < 0) totalIra = 0;
if (isNaN(basis) || basis < 0) basis = 0;
if (isNaN(conversionAmt) || conversionAmt totalIra) {
alert("Error: Total Basis cannot be greater than Total IRA Balance.");
return;
}
// Ensure conversion amount does not exceed total balance
if (conversionAmt > totalIra) {
alert("Error: You cannot convert more than your Total IRA Balance.");
return;
}
// 4. Calculate Ratio
// Avoid division by zero
var ratio = 0;
if (totalIra > 0) {
ratio = basis / totalIra;
}
// 5. Calculate Tax Impact
var taxFreePart = conversionAmt * ratio;
var taxablePart = conversionAmt – taxFreePart;
// Calculate remaining basis
// The basis used is the taxFreePart. Remaining basis = Total Basis – Basis Used.
var remainingBasis = basis – taxFreePart;
// 6. Display Results
document.getElementById('taxFreePercent').innerHTML = (ratio * 100).toFixed(2) + '%';
document.getElementById('taxablePercent').innerHTML = ((1 – ratio) * 100).toFixed(2) + '%';
document.getElementById('taxFreeAmount').innerHTML = '$' + taxFreePart.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('taxableAmount').innerHTML = '$' + taxablePart.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('remainingBasis').innerHTML = '$' + remainingBasis.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results container
document.getElementById('results').style.display = 'block';
}