✏️ Your IRA Balances

Total Non-Deductible Basis ($)

Pre-Tax IRA Balance on Dec 31 ($)

Amount Converted This Year ($)

Your Marginal Tax Rate (%)

💰 Form 8606 Split

Nontaxable Portion$0

Taxable Portion$0

Tax Owed on Conversion$0

Basis Left for Next Year$0

📊 How One Rollover IRA Ruins a Backdoor

Balances	Nontaxable Share	Taxable	Basis Carried Forward
$0 basis, $0 traditional balance, $7,000 conversion	0.0%	$7,000	$0
$15,000 basis, $50,000 traditional balance, $7,000 conversion	26.3%	$5,158	$13,158
$43,000 basis, $96,000 traditional balance, $7,000 conversion	41.7%	$4,078	$40,078

Row one is the textbook backdoor: no pre-tax money anywhere, so $7,000 converts tax-free. Row two is the trap — a $50,000 pre-tax balance plus the $7,000 already converted makes the denominator $57,000, so only 26.3% of the conversion is tax-free and $5,158 becomes ordinary income. The unused basis does not disappear; it waits on line 14 of Form 8606 until every pre-tax dollar is eventually converted.

📖 Working Through Form 8606

The pro-rata rule is mechanical once you accept three facts:

The denominator is the whole year-end IRA balance. Traditional, SEP, and SIMPLE IRAs all count — including accounts you never touch. A 401(k) does not.
The ratio applies to every conversion. You cannot choose to convert "only the non-deductible part"; the IRS taxes conversions proportionally.
Basis carries forward indefinitely. The tax-free share you did not use stays on line 14 of Form 8606 and applies to the next conversion.

The standard fix: roll pre-tax dollars into a 401(k)

Because employer plans are excluded from the pro-rata denominator, rolling a traditional or rollover IRA balance into your current employer's 401(k) before December 31 removes it from the calculation. Confirm with the plan administrator that it accepts rollovers in, and that the plan is not itself a SIMPLE IRA (simple IRAs would re-enter the calculation).

The timing trap

The numerator and denominator use the year-end balance. A rollover completed on January 2 of the following year is too late — the balance on December 31 of the conversion year is what counts.

Why the Rule Is Broader Than It Looks

The pro-rata rule was written to stop high earners from stuffing post-tax money into a Roth while leaving a pre-tax IRA invested alongside it. Because the calculation aggregates all traditional, SEP and SIMPLE IRAs, someone who has changed jobs four times and accumulated four rollover IRAs cannot isolate a clean backdoor to the newest account. The aggregation rule applies per taxpayer, so a spouse's IRA is not pooled — but both spouses' conversions are tested separately.

Is the Tax Ever Worth Paying?

Sometimes. If the taxable portion is small relative to a long horizon, paying a modest tax now may beat the filing complexity of roll-ins and repeated tracking. A $7,000 conversion with a 10% taxable share costs a few hundred dollars at a 24% bracket — but it also resets the basis bookkeeping, and a wrongly filed Form 8606 often requires an amended return. Calculate the tax bill here, then compare it to the cost of a one-time 401(k) roll-in.

❓ Frequently Asked Questions

Does my 401(k) balance count in the pro-rata calculation?▾

No. Only traditional IRAs, SEP IRAs and SIMPLE IRAs — but a rollover IRA is a traditional IRA for this purpose, which is why old employer plans cause problems.

Can a SEP or SIMPLE IRA be rolled into a 401(k) to avoid pro-rata?▾

A SEP can generally be rolled into a qualified plan. A SIMPLE IRA requires a two-year waiting period, and if it sits in your IRA at year-end it re-enters the calculation.

What if I convert the whole balance at once?▾

Converting everything makes the ratio 100% basis and 0% taxable in the year of full distribution — but you pay tax on all pre-tax dollars in that year, often pushing you into a much higher bracket.

Does the five-year Roth clock interact with pro-rata?▾

Only for whether earnings are tax-free. Pro-rata determines the ordinary income on the conversion itself; the five-year conversion clock is a separate penalty question.

⚠️ Important: This tool applies IRC §408(d)(2) pro-rata in its standard form and does not model Roth IRA aggregation, inherited IRAs, in-plan Roth rollovers, or a mid-year death of the IRA owner. The year-end balance rule means any December balance you cannot see here may change the result. Confirm figures on Form 8606 with a tax professional.

🚪 Backdoor Roth Pro-Rata Rule Calculator