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Backdoor Roth IRA Conversion Calculator

Backdoor Roth IRA Conversion:

\[ Conversion\ Tax = Contribution \times Marginal\ Tax\ Rate \]

USD (2025 limit: $7,000)
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1. What is a Backdoor Roth IRA Conversion?

A Backdoor Roth IRA conversion is a strategy used by high-income earners who are ineligible to contribute directly to a Roth IRA. It involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA.

2. How Does the Calculator Work?

The calculator uses the following formula:

\[ Conversion\ Tax = Contribution \times Marginal\ Tax\ Rate \]

Where:

Explanation: The calculation estimates the tax you'll owe when converting from a traditional IRA to a Roth IRA.

3. Importance of Conversion Tax Calculation

Details: Understanding the tax implications helps in financial planning and determining if a Backdoor Roth conversion makes sense for your situation.

4. Using the Calculator

Tips: Enter your planned contribution amount (up to $7,000 for 2025) and your current marginal tax rate as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: Who should consider a Backdoor Roth IRA?
A: High-income earners who exceed Roth IRA contribution limits but want Roth IRA benefits.

Q2: Are there income limits for conversions?
A: No, the income limits that apply to Roth IRA contributions don't apply to conversions.

Q3: When do I pay taxes on the conversion?
A: Taxes are due in the year you perform the conversion.

Q4: What's the pro-rata rule?
A: If you have other traditional IRA funds, the conversion may be partially taxable based on the proportion of pre-tax to after-tax dollars.

Q5: Can I undo a Roth conversion?
A: Prior to 2018, you could recharacterize (undo) a Roth conversion, but this is no longer allowed under current tax law.

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