What is the Pro rata rule for backdoor Roth conversions?
The pro rata rule for backdoor Roth conversions determines what portion of a Roth IRA conversion is taxable when the taxpayer holds pre-tax and after-tax dollars across traditional, SEP, and SIMPLE IRA accounts. High earners cannot isolate the after-tax basis, so conversions are treated as coming proportionally from all IRA balances at year-end. Advisors model the rule using Roth 401k coordination, project federal and state tax cost, review prior Forms 8606, document plan rollover options, and record the conclusion in Individuals advisory workflows before the custodian moves any client money.
Easily save clients thousands in taxes.
Scan client returns.
Uncover savings.
Export a professional tax plan.
.png){kind=small}