conversion from non-deductible to Roth IRA
I have seen articles and discussion about ‘pro-rata rule’ while converting conversion from a non-deductible IRA to a Roth. But I don’t quite understand the rule too well yet. Please explain. Thank you.
I have seen articles and discussion about ‘pro-rata rule’ while converting conversion from a non-deductible IRA to a Roth. But I don’t quite understand the rule too well yet. Please explain. Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2019-10-08 00:34
You can have as many IRA accounts as you wish, but they are all treated as one combined account for tax purposes. Therefore, it makes no difference which account receives your non deductible contribution or which account funds the conversion distribution. The total of your non deductible contributions are reported on Form 8606 for each year you make such a contribution. The 8606 also calculates the taxable amount of the conversion using a ratio of the pre tax balance to the total adjusted balance of all IRA accounts at year end. You should download an 8606 and work through an example to see how this comes together.