- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Back door ROTH taxable event question
Posted on 2/17/25 at 11:00 am
Posted on 2/17/25 at 11:00 am
I currently have a ROTH. I haven't contributed to it in the last two years because i'm over the income limit. I currently do not have a traditional IRA. If I open a traditional and put in $7,000 from my checking account for 2024 and convert to ROTH, will that be a taxable event? Seems if i'm using post tax money and not mixing with a previous traditional IRA funded pre tax, it shouldn't be.
This post was edited on 2/17/25 at 11:34 am
6
Posted on 2/17/25 at 11:30 am to GrizzlyAlloy
It shouldn't be.
Posted on 2/17/25 at 11:30 am to GrizzlyAlloy
You may need to pay if there are any earnings if it’s not converted right away.
This post was edited on 2/17/25 at 11:32 am
Posted on 2/17/25 at 11:36 am to GrizzlyAlloy
This will show my ignorance.
Is there an income limit for contributing to a Roth IRA? I know the $7k and $8k (depending on age) contribution limits, but didn't know if there was any other type of limit?
Is there an income limit for contributing to a Roth IRA? I know the $7k and $8k (depending on age) contribution limits, but didn't know if there was any other type of limit?
Posted on 2/17/25 at 11:47 am to HeartAttackTiger
Yes it’s around $150k single and $236k filing jointly.
Usually goes up 4k to 5k most years and it’s your adjusted gross.
Usually goes up 4k to 5k most years and it’s your adjusted gross.
This post was edited on 2/17/25 at 11:50 am
Posted on 2/17/25 at 11:50 am to GrizzlyAlloy
No, you're only taxed on any amount you earn between contributing and doing the Roth conversion.
Make sure you don't have any money in ANY other tax deferred IRA because it would subject to the pro rata rule and you'd be taxed on that too.
Make sure you don't have any money in ANY other tax deferred IRA because it would subject to the pro rata rule and you'd be taxed on that too.
Posted on 2/17/25 at 11:53 am to GEAUXT
Also, it has become incredibly easy to report on your taxes. Also, vanguard makes it extremely easy to do the conversion. I'm sure it's only a matter of time before the gov closes the loophole. We can't ever have a good thing.
Posted on 2/17/25 at 2:24 pm to Rize
quote:
Yes it’s around $150k single and $236k filing jointly.
Usually goes up 4k to 5k most years and it’s your adjusted gross.
So if you make above this, you can't contribute to a ROTH?
Posted on 2/17/25 at 3:05 pm to HeartAttackTiger
quote:
So if you make above this, you can't contribute to a ROTH?
It's not a hard cutoff; there is an income phase out range where your max contribution amount allowed goes down as you go up in the income range. If you're within the phaseout range, you'd have to calculate how much you're allowed to contribute.
Single $150,000-$165,000
Married, filing jointly $236,000-$246,000
Married, filing separately1 $0–$10,000
Posted on 2/17/25 at 3:33 pm to GrizzlyAlloy
I'm just finding out about a backdoor Roth. If I set up a Roth 25 years ago and contributed for a couple years and then a traditional IRA for a few years but haven't contributed to either in 20 years, can I use those accounts to do this maneuver? If I'm contributing post tax dollars to that IRA to then move over to the Roth, do I need to file form 8606 for those non tax deductible IRA contributions?
Posted on 2/17/25 at 7:57 pm to Jake88
quote:
I'm just finding out about a backdoor Roth. If I set up a Roth 25 years ago and contributed for a couple years and then a traditional IRA for a few years but haven't contributed to either in 20 years, can I use those accounts to do this maneuver? If I'm contributing post tax dollars to that IRA to then move over to the Roth, do I need to file form 8606 for those non tax deductible IRA contributions?
Yes, BUT as I stated before, any money already in your traditional IRA would be taxed. You can either roll that into an employer sponsored tax advantage plan (best option) or just roll the entire traditional IRA amount into Roth and take the tax hit. It all depends on your particular income and tax situation.
The backdoor Roth only makes sense if you don't have a bunch of money already sitting in a traditional/sep/simple IRA
If you really want to blow your mind start reading about the MEGA backdoor Roth
Posted on 2/17/25 at 8:02 pm to GEAUXT
quote:Taxed when? If I have a balance in both a traditional IRA and a Roth but I take $7000 post tax and put it into the ira and then moved that to a Roth, the entire balance in my traditional IRA that's been growing for 25 years will suddenly be taxed?
Yes, BUT as I stated before, any money already in your traditional IRA would be taxed
Posted on 2/17/25 at 8:04 pm to Jake88
quote:
Taxed when? If I have a balance in both a traditional IRA and a Roth but I take $7000 post tax and put it into the ira and then moved that to a Roth, the entire balance in my traditional IRA that's been growing for 25 years will suddenly be taxed?
Yes. Any amount you have in a tax-deferred IRA as of December 31st of the year you do the backdoor will be taxed
Posted on 2/17/25 at 8:05 pm to GEAUXT
It is called the "pro rata" rule
Posted on 2/17/25 at 8:07 pm to GEAUXT
quote:Taxed as if I was taking it out entirely at my top marginal rate? And again every year I move 7k in and out to a roth?
Yes. Any amount you have in a tax-deferred IRA as of December 31st of the year you do the backdoor will be taxed
Ok, I read the pro-rata rule. If I had 100k in the ira and put 7k post tax into it to move to a roth, the pretax and post tax money gets moved to the roth such that I'd pay tax on the pretax portion of the 7k moved to the roth. Right?
This post was edited on 2/17/25 at 8:13 pm
Posted on 2/17/25 at 8:13 pm to Jake88
You would only be taxed once, and yes at your marginal rate. At that point all of your money would be Roth money.
Going forward, you would contribute the money to your tradional IRA, and then as soon as the funds deposit convert it to Roth. That is not a taxable event.
If moving the money to a non-IRA tax-deferred account if not an option then you would have to do the math on whether the initial tax hit is worth the squeeze.
For most people it only makes sense if they have either 0 or a very small balance in their traditional IRA, OR if you have a year of very low income where the tax hit will be minimal.
Going forward, you would contribute the money to your tradional IRA, and then as soon as the funds deposit convert it to Roth. That is not a taxable event.
If moving the money to a non-IRA tax-deferred account if not an option then you would have to do the math on whether the initial tax hit is worth the squeeze.
For most people it only makes sense if they have either 0 or a very small balance in their traditional IRA, OR if you have a year of very low income where the tax hit will be minimal.
Posted on 2/17/25 at 8:15 pm to Jake88
quote:
Ok, I read the pro-rata rule. If I had 100k in the ira and put 7k post tax into it to move to a roth, the pretax and post tax money gets moved to the roth such that I'd pay tax on the pretax portion of the 7k moved to the roth. Right?
You would be taxed on $100k
Posted on 2/17/25 at 8:28 pm to GEAUXT
quote:I'm reading and it doesn't sound like that's accurate. It appears that if there was 93k of pretax contributions in an ira and i put in 7k for a move to a roth, 93% of that 7k would be subject to my marginal tax rate, not the amount that will stay behind in the traditional IRA.
You would be taxed on $100k
Posted on 2/17/25 at 9:34 pm to Jake88
Yes, you are actually correct. The calculation is based on the ratio.
The point remains that having any money in your traditional IRA basically negates any benefits of the backdoor Roth.
The point remains that having any money in your traditional IRA basically negates any benefits of the backdoor Roth.
Posted on 2/18/25 at 6:49 am to GrizzlyAlloy
Just remember a rollover IRA counts as a traditional IRA. It’s having a rollover that trios a lot of people up.
But if you have no traditional or simple or Sep or rollover then you are good to go!
But if you have no traditional or simple or Sep or rollover then you are good to go!
Page 1 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News