How the math works
This calculator applies IRC \u00a7408(d)(2) \u2014 the pro-rata aggregation rule \u2014 to determine the taxable portion of a backdoor Roth IRA conversion. The IRS treats all your Traditional, SEP, and SIMPLE IRA balances as one combined pool on December 31 of the conversion year. The non-taxable share of any conversion equals your after-tax basis divided by the total pool size. Workplace plans (401(k), 403(b), 457(b)) are explicitly excluded from the aggregation.
The default assumes a same-year contribution + conversion (the cleanest approach that minimizes taxable earnings between the two steps). All math is deterministic and reproducible \u2014 there is no AI inference in the calculation. The pro-rata basis ratio is rounded to 3 decimal places per Form 8606 line 10 instructions, and capped at 1.000. For planning purposes, the federal tax cost is estimated using your marginal tax rate; state tax is not modeled.
What this tool does not fully model
- Mega backdoor Roth (after-tax 401k). The mega backdoor Roth uses your 401(k) plan's after-tax contribution bucket + in-plan Roth conversion. It is not subject to the IRA pro-rata rule because workplace plans are excluded from \u00a7408(d)(2). Calculator #17 (future) will add mega backdoor logic.
- NIIT (Net Investment Income Tax). A 3.8% additional tax may apply on the taxable conversion income for high earners (MAGI >$200K single / $250K MFJ). This is on top of ordinary income tax.
- 5-year clock for the 10% penalty. Each Roth conversion starts its own 5-year clock under \u00a7408A(d)(3)(F). Withdrawals of converted principal before the 5-year clock expires may trigger the 10% early-withdrawal penalty. This is a separate issue from the pro-rata rule itself.
- State tax treatment. The pro-rata rule is a federal matter. Pennsylvania, Illinois, and Mississippi exempt retirement income from state tax. California, New York, and New Jersey tax Roth conversions as ordinary income \u2014 your state tax bill will be higher than the federal pro-rata tax alone.
- SEP-IRA contribution math. For self-employed workers, the SEP-IRA contribution limit is up to 25% of net SE income (capped at $72,000 in 2026). We model the SEP balance as input but do not compute the contribution limit.
- Spousal backdoor Roth coordination. Each spouse computes pro-rata independently, but coordinated timing (e.g., both spouses roll pre-tax IRA to 401(k) before December 31) can be coordinated with a tax professional.
Worked example: $200,000 single, clean backdoor
At $200,000 MAGI as a single filer, you are well above the $168,000 direct Roth IRA phase-out ceiling for 2026 IRS Notice 2025-67 (2026 tax year) . Direct Roth contributions are not allowed \u2014 the backdoor Roth is your legal workaround. You make a $7,500 non-deductible contribution to a Traditional IRA in March 2026, then convert the full $7,500 to a Roth IRA within days. Because you hold $0 in any pre-tax Traditional, SEP, or SIMPLE IRA at December 31, 2026, your basis ratio (Form 8606 line 10) is 1.000. Your conversion is fully tax-free \u2014 $0 added to Form 1040 line 4b. You now hold $7,500 of new Roth IRA principal that grows tax-free and is qualified for tax-free withdrawal after age 59\u00bd.
Worked example: $300,000 married filing jointly with $145,000 rollover IRA
At $300,000 MAGI filing jointly, you are above the $252,000 MFJ phase-out ceiling. Your spouse rolled a $145,000 old 401(k) into a rollover IRA three years ago \u2014 a common situation. You make a $7,500 non-deductible Traditional IRA contribution and convert it to Roth. The pro-rata rule applies: your basis ratio is $7,500 \u00f7 ($145,000 + $7,500) = 0.0492. Only $369 of your $7,500 conversion is non-taxable; the remaining $7,131 is added to Form 1040 line 4b as ordinary income. At a 24% marginal rate, your federal tax cost is $1,711.
The pro-rata trap turned what looked like a tax-free backdoor Roth into a $1,711 tax bill plus multi-decade Form 8606 reporting. The fix: roll your $145,000 pre-tax IRA balance into your current employer's 401(k) BEFORE December 31, 2026. Workplace plans are excluded from \u00a7408(d)(2) aggregation IRS Notice 2014-54 (2014 (still applicable for 2026 conversions)) . After the rollover, your IRA pot is just your $7,500 non-deductible contribution; the basis ratio becomes 1.000 and the conversion is fully tax-free. This single move saves $1,711 in federal tax for 2026.
Worked example: $220,000 self-employed with $40,000 SEP-IRA
Self-employed workers face a particularly nasty version of the pro-rata trap. You earn $220,000 as a consultant with $40,000 accumulated in a SEP-IRA from prior years. You do a clean backdoor Roth: $7,500 non-deductible contribution + immediate conversion. Then in September 2026 you make your annual SEP contribution of $20,000 for the 2026 tax year. On December 31, 2026, your SEP-IRA balance is $60,000-plus. Form 8606 line 6 = $60,000. Line 9 = $60,000 + $0 + $7,500 = $67,500. Line 10 = $7,500 \u00f7 $67,500 = 0.111.
Only $833 of your $7,500 conversion is non-taxable; $6,667 is taxable at your marginal rate. Even though your SEP contribution was made five months after the backdoor conversion, the \u00a7408(d)(2) snapshot is the December 31 aggregate \u2014 not the date-of-conversion balance. The fix: roll the SEP-IRA balance into a Solo 401(k) before December 31, isolating the basis. Self-employed workers who want clean backdoor Roths in any year with a SEP contribution should consider a Solo 401(k) instead.
Beyond the basics: the cleanout strategy
The single most valuable backdoor Roth move is the cleanout: rolling pre-tax IRA money into your current employer's 401(k) BEFORE December 31. This works because IRC \u00a7408(d)(2) explicitly excludes workplace plans from the aggregation \u2014 your 401(k), 403(b), and 457(b) balances are not part of the pro-rata pot. By moving pre-tax IRA dollars into your 401(k), you empty the pro-rata pool, and your December 31 IRA balance becomes just your non-deductible Traditional IRA contribution.
The cleanout requires (a) a workplace 401(k) or 403(b) that accepts incoming IRA rollovers (most do \u2014 verify with your plan administrator) and (b) timing \u2014 the rollover must complete BEFORE December 31 of the conversion year, because the pro-rata calculation uses the December 31 IRA balance. Allow 4-6 weeks for the rollover check to clear; initiate the rollover by mid-November if you plan to convert in December.
Reverse rollover mechanics
Initiate a direct (custodian-to-custodian) rollover from your Traditional/SEP/SIMPLE IRA to your current employer's 401(k). The 60-day indirect rollover rule under \u00a7408(d)(3) creates needless risk \u2014 always use the direct method, never receive the funds yourself. The 401(k) plan administrator will provide a rollover-in form; your IRA custodian will send the funds directly to the 401(k). Confirm the rollover is posted BEFORE December 31 by checking both account statements.
Convert everything to Roth (alternative)
If your 401(k) plan does not accept incoming IRA rollovers, the alternative is to convert the entire pre-tax IRA balance to Roth in the same year. This creates a large taxable event (potentially five figures for $145K+ pre-tax balances) but eliminates the pro-rata pool going forward. Strategically, this works best in low-income years (e.g., between jobs, sabbatical, early retirement) when the conversion is taxed at a lower marginal rate.
The 5-year clock: each conversion starts its own
Under IRC \u00a7408A(d)(3)(F), each Roth conversion starts its own 5-year clock for the 10% early-withdrawal penalty on the converted principal. If you do a backdoor Roth every year for 10 years, you have 10 separate 5-year clocks running simultaneously. Withdrawals of the converted principal before the relevant clock expires may trigger the 10% penalty. Earnings withdrawn before age 59\u00bd are always subject to the 10% penalty (the 5-year clock does not protect earnings).
The 5-year clock is a separate issue from the pro-rata rule itself. Even a fully tax-free backdoor Roth (basis ratio 1.000, $0 taxable) is subject to the 5-year clock. For workers under 59\u00bd who plan to use their Roth IRA principal within 5 years, the backdoor Roth conversion may not make sense \u2014 the tax savings on the conversion are real but the 10% penalty on early withdrawal may offset them.
Spousal aggregation: two separate money pots
Married couples often confuse the pro-rata aggregation rule with spouse-spouse aggregation. The IRS treats each spouse's Traditional/SEP/SIMPLE IRA balances as separate pots for pro-rata purposes. If your spouse has a $100,000 rollover IRA from a previous job, that balance does NOT enter your pro-rata calculation \u2014 and vice versa. Each spouse can independently execute a backdoor Roth, with each filing a separate Form 8606.
This is useful for high-earning couples where one spouse has a clean IRA pot and the other has pre-tax IRA money from a prior job. The clean-pot spouse can execute a clean backdoor Roth (basis ratio 1.000) without any interference from the other spouse's pre-tax IRA balance. Both spouses should still coordinate the cleanout rollover timing if they are both doing backdoor Roths in the same year.
Form 8606 filing is mandatory
Form 8606 is the IRS document that establishes your after-tax basis in your Traditional IRA. It is mandatory for any year you make a non-deductible Traditional IRA contribution or convert a Traditional IRA to a Roth. Part I (lines 1-15) tracks your cumulative basis from non-deductible contributions. Part II (lines 16-18) reports the current-year Roth conversion and computes the taxable amount.
Failure to file Form 8606 in any year forfeits your basis tracking. The IRS has no record of your non-deductible contribution, so when you convert to Roth, the IRS treats the entire conversion as pre-tax \u2014 your $7,500 contribution becomes doubly taxable: once as ordinary income at conversion, and again as ordinary income on future qualified distributions. The IRS penalty for failure to file is $50 per year; the penalty for overstatement of basis is $100 per year. Keep copies of every Form 8606 you file indefinitely \u2014 basis carries forward across decades.
State tax differential: the overlooked cost
The pro-rata rule is a federal matter. State tax treatment of Roth conversions varies widely. Three states exempt retirement income from state tax entirely: Pennsylvania, Illinois, and Mississippi. If you live in one of these states, your state tax cost on the taxable conversion is $0. Other states (Texas, Florida, Nevada, Washington, Tennessee) have no state income tax at all \u2014 same outcome.
Most other states tax Roth conversions as ordinary income, applying their own marginal rates. California is in the second camp: state income tax applies to the taxable portion of the conversion, with marginal rates from 1% to 13.3%. A $7,131 taxable conversion in California adds roughly $500-$700 in additional state tax on top of the federal $1,711. New York and New Jersey similarly tax the full conversion at high marginal rates.
The state tax angle is particularly important for workers considering retirement relocation. If you are approaching retirement and have accumulated substantial pre-tax IRA balances, moving to a no-income-tax state before doing a large Roth conversion can save tens of thousands in combined state tax. The cleanout strategy becomes even more valuable in high-tax states.
Related tools and next steps
The backdoor Roth is one piece of the broader high-earner retirement planning puzzle. The tools and guides below are the natural next reads after this calculator.
- Retirement Contribution Stack Calculator — for the full 401(k) + HSA + IRA stacking math at your income and age. If you have not yet maxed your $24,500 401(k) elective deferral + $4,400 HSA + $7,500 IRA, start there before backdoor Roth. The $7,500 backdoor Roth is the last $7,500 of your stack.
- Retirement Contribution Stack 2026 guide — the long-form companion to the stacking calculator. Includes the 4 worked examples ($50K / $80K / $150K / $200K) and the mega backdoor + age 60-63 super catch-up deep dives.
- Tax Estimator Calculator — for high earners who want to confirm their federal marginal rate before doing a backdoor Roth conversion. The $7,131 taxable amount from the worked example at $300K MFJ would be taxed at 24% marginal; the estimator confirms the bracket.
- Salary to Hourly Calculator — for workers considering reduced-hour roles (e.g., consulting) where the backdoor Roth can capture lower-income years for Roth conversions at lower marginal rates.
- Calculator #17: Mega Backdoor Roth (coming 2026-Q4) — for high earners with plans that allow after-tax 401(k) contributions. Mega backdoor is NOT subject to the IRA pro-rata rule because workplace plans are excluded from §408(d)(2) aggregation — different strategy, different math.
- Calculator #19: Solo 401(k) Calculator (future) — for self-employed workers. Solo 401(k) is the strategic alternative to SEP-IRA when you have a profitable side practice; it provides much higher contribution room (up to $72,000) and supports both employee deferrals + employer profit-sharing.
