Backdoor Roth IRA with Traditional IRA funds from 2024

Submitted by David on Fri, 2025-01-17 11:54

Hello!

Thank you for such a great forum.

My wife and I have a combined adjusted gross income of over $240K in 2023. We placed $7000 each in a Fidelity traditional IRA in December 2024. It did not get processed until January 2025. We invested it into Fidelity Index Fund and now it has grown to $7,134. However now we would like to place convert it into Roth IRA via Backdoor Roth.

Are we subject to taxes only on the $134 or the full $7134?

Should we add an additional $7000 for 2025 traditional IRA contributions, and convert $14,134 all at once for 2025?

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Permalink Submitted by Alan - IRA critic on Fri, 2025-01-17 16:43

I assume that your MAGI would also be over 240k in 2024, which is why you made non deductible TIRA contributions. You need to verify with the IRA custodian which year they assigned to these contributions. If they assigned them to 2025, they can simply reassign the year to 2024 because at this time contributions could be made for either year. Verify that the correct year has been assigned to those contributions and if a correction needs to be made it should be done before converting.

The other choice if you find that these contributions were assigned to 2025 is to leave them alone if you can come up with the money to make your 2024 contributions prior to 4/15.

Now, to your question, if a spouse has no other non Roth IRA balances other than this 7,134, when this is converted there will be 134 each of taxable income. You can also make the “other year” contribution (the year that the current ones were NOT assigned to) and convert both years in one conversion.

Just be careful that both contributions are NOT assigned to the same year, or you will create an excess contribution that will be a mess after you converted both contributions.