Conversion Traditional to Roth and then Back door in same tax year
I rolled over a traditional 401k to a traditional IRA in April of 2024. I now plan to convert the traditional IRA to a Roth IRA in July 2024. Can I then do a Back-Door Roth in tax year 2024? Or, because I had a tradtional IRA for a few months of 2024 before converting to a Roth, do I have to wait until tax year 2025 to perform a back door Roth to avoid the pro-rate issue?
Permalink Submitted by Alan - IRA critic on Sat, 2024-06-22 16:32
You don’t have to wait. What happens with Form 8606 when you complete the transactions you described is that both the conversions will be taxable/non taxable at the same %.
Let’s say that if you rolled over 43k of pre tax 401k dollars and converted it with no other transactions, the taxable amount would be 43k. Or if you did not do that, but instead make a 7k ND contribution and converted it (back door Roth), the taxable amount would be 0.
Doing both of the above, the total conversions taxable amount will still be 43k determined as follows. Basis will be 14% (7/50), therefore 86% will be taxable. .86*43k=36,980 and .86*7k=6,020. Total taxable amount will be 43k.
Therefore, this results in the same taxable amount as if you did these separately in different years.
Permalink Submitted by john Styrbicki on Sat, 2024-06-22 20:09
Thank you very much for that explanation!