What is a backdoor Roth IRA?

A backdoor Roth IRA is a two-step strategy that lets high‑income earners move money into a Roth IRA even when their income is too high to contribute directly. The basic idea is simple:

1. Make a nondeductible contribution to a traditional IRA.
2. Convert that amount from the traditional IRA to a Roth IRA.

Because Roth IRAs grow tax‑free and qualified withdrawals are tax‑free, many investors use the backdoor Roth to shift money into an account with more favorable long‑term tax treatment. However, the IRS does not let you choose to convert only your after‑tax dollars when you have other pre‑tax IRA money. Instead, it requires the pro‑rata rule.

How the pro‑rata rule works

The pro‑rata rule says that every Roth conversion from your IRAs is made from a mix of pre‑tax and after‑tax money, in proportion to how much of each you hold across all of your traditional, SEP, and SIMPLE IRAs. You cannot isolate just the nondeductible (after‑tax) contributions for a tax‑free conversion if you still have pre‑tax balances in any IRA.

For pro‑rata purposes, the IRS looks at your total IRA balances as of December 31 of the tax year of the conversion. Employer plans like 401(k)s and 403(b)s are not included in this total.

Formulas used in this calculator

This calculator uses a straightforward version of the IRS pro‑rata formula to estimate what portion of your Roth conversion is taxable and how much after‑tax basis remains.

Let:

• T = total value of all traditional, SEP, and SIMPLE IRAs (pre‑tax + after‑tax) at the time of conversion
• B = total nondeductible (after‑tax) basis in those IRAs
• C = amount you convert to a Roth IRA

The IRS defines the nontaxable portion of your conversion as:

The taxable portion is then:

Substituting gives:

In words:

• The nontaxable share of your conversion equals the after‑tax basis divided by your total IRA balance, multiplied by the conversion amount.
• The taxable share is the remaining portion of the conversion.

This calculator then multiplies the taxable portion by your marginal tax rate (the rate you enter) to estimate the federal income tax due on the conversion:

Interpreting your results

When you run the calculator, you will typically see:

• The taxable portion of your conversion.
• The nontaxable portion of your conversion (covered by after‑tax basis).
• An estimate of the federal income tax on the conversion based on the marginal rate you entered.
• Your remaining IRA basis after the conversion.

Key patterns to watch:

• If your after‑tax basis is a large share of your total IRA balance, more of the conversion will be tax‑free.
• If your pre‑tax balances are much larger than your basis, most of your conversion will be taxable.
• Higher marginal tax rates increase the estimated tax cost of the same taxable amount.

Worked example

Assume the following:

• Total IRA balance (T): $100,000
• Nondeductible basis (B): $20,000
• Conversion amount (C): $10,000
• Marginal tax rate: 24%

Step 1: Compute the nontaxable share of the conversion.

The after‑tax basis is 20% of the total IRA balance ($20,000 / $100,000). Therefore, 20% of the conversion is nontaxable:

$10,000 × 20% = $2,000 nontaxable.

Step 2: Find the taxable portion.

$10,000 − $2,000 = $8,000 taxable.

Step 3: Estimate federal income tax using the marginal rate.

$8,000 × 24% = $1,920 estimated tax.

Step 4: Update remaining basis.

You used $2,000 of your basis in this conversion. The new basis is:

$20,000 − $2,000 = $18,000 remaining basis to carry forward on future Form 8606 filings.

Example outcomes table

The table below shows how different IRA balances and basis amounts affect the taxable share of a conversion.

• In the first row, 40% of the IRA is after‑tax basis, so only 60% of the conversion is taxable.
• In the second row, basis is a much smaller slice of the total (6%), so almost the entire conversion is taxable.
• In the third row, converting more than the annual contribution amount still leads to a substantial tax bill because much of the conversion comes from pre‑tax dollars.

How to use this calculator

To get the most accurate estimate, enter the following values carefully:

• Total IRA balance ($): Add up the value of all traditional, SEP, and SIMPLE IRAs you own as of the end of the year (December 31), before considering the conversion. Do not include Roth IRAs, 401(k)s, 403(b)s, or other employer plans.
• Nondeductible basis ($): Use the total after‑tax contributions reported on your most recent IRS Form 8606, adjusted for any prior conversions or distributions. This is the amount on which you have already paid income tax.
• Conversion amount ($): The dollar amount you plan to convert from your traditional/SEP/SIMPLE IRAs to a Roth IRA during the year.
• Marginal tax rate (%): Your top federal income tax rate for the year. You can approximate this from current IRS tax brackets based on your taxable income, filing status, and other income.

The calculator uses these inputs to apply the pro‑rata formula and estimate your taxable conversion amount, nontaxable amount, and federal tax on the conversion.

Assumptions and limitations

This tool is designed for education and quick planning, not for preparing a tax return. It makes several simplifying assumptions:

• Marginal rate only: The calculation uses the single marginal tax rate you enter. It does not model full tax brackets, phase‑outs, credits, Net Investment Income Tax, the alternative minimum tax, or other federal rules.
• IRA types included: It assumes your total IRA balance includes all traditional, SEP, and SIMPLE IRAs that are subject to the pro‑rata rule. Employer plans (such as 401(k)s, 403(b)s, and 457(b)s) are not included.
• Timing of balances: The total balance is treated as your year‑end (December 31) IRA value for the tax year of the conversion, which is how the IRS applies the pro‑rata rule.
• No penalties shown: The calculator does not account for early distribution penalties, excess contribution penalties, or any other penalties that might apply if a transaction is structured incorrectly.
• No state or local tax: State and local income taxes are ignored. Some states treat IRA basis and Roth conversions differently from federal rules, which can change your actual tax cost.
• Single‑year view: The results focus on a single tax year and do not project future tax savings or long‑term investment performance.
• Accurate basis required: The accuracy of the results depends on you entering the correct nondeductible basis. If your Form 8606 history is incomplete or incorrect, this calculator cannot fix that.

Because tax rules are complex and subject to change, you should confirm your numbers using official IRS instructions and, when needed, professional advice.

Tracking basis with IRS Form 8606

Every time you make a nondeductible contribution to a traditional IRA or complete a Roth conversion that involves after‑tax amounts, you generally need to file IRS Form 8606, Nondeductible IRAs. This form tracks:

• Your running total of nondeductible (after‑tax) IRA contributions.
• The portion of each distribution or Roth conversion that is nontaxable.
• Your remaining basis to carry into future years.

The calculator’s estimate of your remaining basis is intended to mirror the way Form 8606 walks your basis forward after a conversion. Always compare the tool’s output with the instructions for Form 8606 to ensure consistency in your situation.

When a backdoor Roth IRA may or may not make sense

A backdoor Roth IRA can be especially attractive when:

• You are above the income limit for direct Roth IRA contributions.
• You expect to be in the same or a higher tax bracket in retirement.
• You have little or no existing pre‑tax IRA money, so the pro‑rata rule does not cause a large tax bill.

It may be less attractive when:

• You hold large pre‑tax IRA balances that make most of your conversion taxable.
• You expect to be in a much lower tax bracket in retirement.
• You live in a state that heavily taxes Roth conversions.

In some cases, investors move pre‑tax IRA funds into an employer plan such as a 401(k) (when allowed) before attempting a backdoor Roth. That can reduce or eliminate pre‑tax IRA balances and limit the impact of the pro‑rata rule. This strategy has its own rules and trade‑offs and generally warrants professional guidance.

Important disclaimer

This calculator provides a simplified estimate of the taxable portion of a backdoor Roth IRA conversion under the pro‑rata rule. It does not give personalized tax, investment, or legal advice, and it may not reflect all rules that apply to your situation. Before making significant contributions, conversions, or withdrawals, consider reviewing your plan with a qualified tax professional or financial advisor.