Dollar Almanac

IRA Pro-Rata Rule Calculator

Updated

A Roth conversion is taxed across every traditional, SEP and SIMPLE IRA you own, not the account the money came from. One old rollover can make a backdoor Roth almost entirely taxable.

Your conversion is taxed in proportion to how much of your total IRA balance is pre-tax. A workplace plan is not an IRA, so money held there is outside the calculation entirely.

Form 8606 line 14 from your most recent return. Contributions you got no deduction for.

Every traditional, SEP and SIMPLE IRA. Not 401(k) or 403(b) balances.

Before the conversion. Used for the marginal rate, not for eligibility.

Filing status

Taxable this year

$6,510.00

Converted to Roth
$7,000.00
Non-taxable share
7.00%
Not taxed
$490.00
Federal tax it adds
$1,562.40
Marginal rate
24.00%
Basis carried forward
$6,510.00

If that balance were in a 401(k)

A workplace plan is not an IRA, so §408(d)(2) does not reach it. The same conversion would be taxed on $0.00 and cost $0.00.

$1,562.40

what the IRA balance costs this conversion, this year

warning: A workplace plan is not counted in this calculation

§408(d)(2) aggregates IRAs. A 401(k) or 403(b) is not an IRA, so pre-tax money held there does not enter the ratio. Whether a plan accepts money rolled in from an IRA is the plan's decision, and the balance has to be there by 31 December to matter for this year.

What this assumes

Assumption set tax 2026

Filing status
single
Deductions
Standard deduction only
Method
Incremental: tax with the conversion minus tax without it
Aggregation
All traditional, SEP and SIMPLE IRAs. Workplace plans excluded
Brackets
Rev. Proc. 2025-32
IRA contribution limit
Notice 2025-67

How this works

A backdoor Roth is a non-deductible IRA contribution converted straight to a Roth. The appeal is that a contribution you got no deduction for should convert without tax, because there is nothing untaxed to tax.

That holds only while you have no other pre-tax IRA money. Section 408(d)(2) treats all of your traditional, SEP and SIMPLE IRAs as one account, so the conversion is taxed in proportion to how much of the combined balance is pre-tax. Opening a fresh IRA for the contribution and converting it the next day changes nothing: the new account joins the same pile before the proportion is worked out.

Three things make this expensive rather than merely surprising:

  • Nothing tells you at the time. The conversion goes through exactly as instructed. The figure appears on a Form 1099-R the following January, by which point the year is closed.
  • It repeats. The basis you could not use carries forward, but it is spread across every future conversion while the pre-tax balance exists. This is an annual cost, not a one-off.
  • The fix has a deadline. The balance that counts is what the IRAs hold on 31 December. A rollover into a workplace plan completed in December still clears the whole year; one completed in January does not help the year before.

Worked example

Someone contributes $7,000.00 to a traditional IRA with no deduction, intending to convert it immediately. They also hold $93,000.00 of pre-tax money in an IRA, rolled over from an employer years ago and not thought about since.

The ratio is measured against everything: $93,000.00 still in the IRAs at the year end, plus the $7,000.00 converted out of them, which is $100,000.00. The after-tax basis is $7,000.00 of that, or 7.00%.

So $490.00 of the conversion escapes tax and $6,510.00 does not. At $200,000.00 of other income that costs $1,562.40 in federal tax. The remaining $6,510.00 of basis carries forward to next year’s Form 8606.

Had the $93,000.00 been sitting in a 401(k) instead, none of it would have entered the calculation. The same conversion would have been taxed on $0.00 and cost $0.00. The difference, $1,562.40, is what the location of that balance is worth this year.

What this does not tell you

Whether moving money into a workplace plan is the right call, which is not only a tax question: plan menus are narrower than an IRA’s, fees differ in both directions, and creditor protection and withdrawal rules are not the same. Whether your plan accepts rollovers in at all, which is the plan’s decision and is written in its document rather than in the statute.

It does not model state tax, the five-year clock on converted amounts, required minimum distributions, or inherited IRAs, which have their own basis rules. It assumes the standard deduction and treats your other income as ordinary. If a large part of your income is long-term capital gains or qualified dividends, the marginal rate here will be wrong in a way that matters.

And it is a calculation, not advice. A conversion that costs tax this year can still be the right decision. How we compute things sets out what these tools do and do not do.

Sources

References used to explain this page. Listing a publisher is not a claim that they endorse it.

Figures are transcribed from these documents directly. Where a value has not been verified against its source, this page shows no number rather than an estimate.

Questions

Which accounts count toward the pro-rata calculation?
Every traditional, SEP and SIMPLE IRA you own, added together. Section 408(d)(2) treats them as one contract for this purpose, so it does not matter which account the converted money left or whether you opened a fresh one for the contribution. Your spouse's IRAs are not included: the rule is per person, not per return, even on a joint filing.
Do my 401(k) balances count?
No. A 401(k), 403(b) or 457(b) is a workplace plan rather than an IRA, and the rule reaches IRAs. That exclusion is the whole reason this calculator shows two figures: pre-tax money held in a plan is outside the calculation, so moving an IRA balance into a plan can make a conversion tax-free that would otherwise be taxed almost in full.
Which day's balance is used?
The total on 31 December of the year you convert, not the balance on the day of the conversion. This is the detail most often got wrong, and it is got wrong expensively: converting in March and moving the rest into a plan in November does not help that year, because line 6 of Form 8606 asks what the IRAs held at the end of it.
Is the basis I could not use lost?
No. It carries forward on line 14 of Form 8606 and it is still yours. What it does not do is come out this year. While the pre-tax balance exists, the basis is spread across every future conversion in smaller and smaller proportions, which is why the cost is usually worth thinking about per year rather than once.
Why does my figure differ slightly from the form?
Form 8606 rounds the non-taxable proportion to three decimal places. This calculator does not, because the rounding is a convenience for a paper form and it moves the taxable amount by up to a dollar on a large conversion, in a direction nobody chose. Your return will differ from this by cents rather than by anything that changes a decision.
Does converting more make the proportion better?
Not by itself. Converting a larger amount increases both the taxable and the non-taxable part in the same proportion, because the ratio is set by the balances rather than by the conversion. What changes the ratio is changing the balances: reducing the pre-tax total, or adding basis.
What does this not cover?
State tax, the five-year clock that applies to converted amounts, required minimum distributions for anyone already subject to them, and inherited IRAs, which have their own basis rules. It also assumes the standard deduction and treats your other income as ordinary.

Related