Backdoor Roth Pro-Rata Rule Calculator

How The Pro-Rata Rule Works

IRS aggregates ALL your Traditional, SEP, and SIMPLE IRA balances on December 31 of the conversion year. Your conversion is treated as proportionally pre-tax and basis. Example: $7K basis, $63K pre-tax = 10% basis. A $7K conversion is 90% taxable ($6,300 added to income).

The 401(k) Workaround

The pro-rata rule applies only to IRA balances, NOT to 401(k)/403(b)/TSP. Strategy: rolling pre-tax IRA balances INTO your employer 401(k) before converting clears the IRA balance for pro-rata. Then the non-deductible IRA conversion is 100% basis = 100% tax-free. Confirm your 401(k) accepts rollovers from IRA.

Form 8606 Requirements

Every year you make a non-deductible IRA contribution, file Form 8606 with your 1040. This establishes basis tracking. Skipping Form 8606 means the IRS treats the entire IRA as pre-tax — and you pay tax twice on the basis when you eventually withdraw. $50 penalty per missing Form 8606, but more importantly, basis is lost.

The December 31 Aggregation Trap For 2026 Conversions

The pro-rata denominator is your total pre-tax IRA balance on December 31 of the conversion year — not the day you convert. Under IRS Publication 590-A, that year-end snapshot decides the taxable fraction of every conversion you did that year. Two traps: (1) if you convert in January but then roll a 401(k) INTO a Traditional IRA in November, the January conversion is retroactively taxed as if the November pre-tax balance was there all along; (2) if you roll pre-tax IRAs OUT to a 401(k) in December, do it before December 31 and get the 401(k) trustee's written confirmation dated in-year — a rollover in transit on 12/31 still counts as an IRA balance. Report the conversion and basis on IRS Form 8606, filed with your 2026 Form 1040 by 15 April 2027.

Sources: IRS Publication 590-A, Form 8606 instructions, IRC §408(d)(2) aggregation rule. Last updated 2026-07-01.