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Now she wants to convert $25,000 to a Roth IRA. Using the pro-rata rule, the nontaxable portion of that conversion would be $6,250 (25% x $25,000), and the rest would be added to her taxable ...
A backdoor Roth IRA lets high-income earners convert after-tax traditional IRA funds to Roth IRA for tax free growth. ... Unlike Traditional IRAs, Roth IRAs have no RMDs. Pro-Rata Rule: If you ...
To figure out what you’ll owe, you must abide by the IRS’s pro rata rule, which forces you to consider your IRA assets as a whole. ... So a backdoor Roth IRA conversion allows high-income ...
Everyone qualifies to make backdoor Roth IRA contributions using after-tax funds you contribute to a traditional IRA and then roll over to a Roth IRA. Note that the pro-rata rule also applies here. 3.
Individuals make a contribution to a nondeductible IRA first and then transform it into a Roth IRA – the so-called backdoor Roth IRA approach. ... Beware the pro-rata rule on conversions.
Finally, any Roth IRA is subject to the IRS’ pro-rata rule. This rule applies when you have both a pre-tax IRA and a post-tax Roth IRA. In that case you must take all withdrawals proportionally ...
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