Backdoor Roth Pro-Rata Calculator

The pro-rata rule is the IRS formula that decides how much of an IRA-to-Roth conversion is taxable. Under Internal Revenue Code 408(d)(2), all of your traditional, SEP, and SIMPLE IRAs are treated as one combined pot, and every conversion is taxed by the ratio of your after-tax basis to that total balance. You cannot pull out only the after-tax dollars, so any pre-tax money you already hold makes part of the conversion taxable.

The math is one fraction. Your after-tax basis, meaning the nondeductible contributions you have made, is the numerator. Your entire year-end IRA balance across all traditional, SEP, and SIMPLE accounts is the denominator. That percentage is the tax-free share of anything you convert. The rest is ordinary income. A 401(k) is not an IRA, so its balance never enters the calculation.

Say you make a $7,000 nondeductible contribution but already hold $63,000 of pre-tax money in a rollover IRA. Your total is $70,000 and your basis is $7,000, so your basis fraction is 10 percent. Convert the full $7,000 and only $700 escapes tax. The other $6,300, or 90 percent, lands on your return as taxable income.

Nothing about your $7,000 changed. The pre-tax balance sitting beside it dragged the ratio down. At a 24 percent marginal rate, that 90 percent taxable slice adds roughly $1,512 to your tax bill for a move you expected to be nearly free. A large pre-tax balance is what turns a clean backdoor Roth into a taxable event.

The cleanest fix is to empty the pre-tax side of your IRA pot before you convert. A 401(k), 403(b), or governmental 457(b) is not an IRA, so rolling your pre-tax traditional, SEP, or rollover IRA money into an employer plan that accepts incoming rollovers removes it from the denominator entirely. Do this before December 31 of your conversion year, because the year-end balance is what counts. After the rollover, only your after-tax basis remains, and converting it is nearly tax-free.

One exception matters for business owners. A SIMPLE IRA cannot be rolled into a 401(k) during its first 2 years, measured from your first contribution, so the fix is closed off until that window passes. Whatever you convert, report it on Form 8606 so the IRS credits the basis you already paid tax on.

The calculator applies the pro-rata fraction to the amount you enter and multiplies the taxable slice by your marginal rate to approximate the added federal tax. Enter IRA balances only, since 401(k), 403(b), and 457(b) money is excluded from the pot. The rule measures your balance on December 31 of the conversion year, so the result assumes the pre-tax figure you enter is what you will still hold at year-end. It does not model state tax, other income, or the leftover basis that carries forward on Form 8606.