WealthRabbit Support

Are Backdoor Roth IRAs taxable?

Yes, a Backdoor Roth IRA conversion may be taxable, depending on your existing IRA balances. While the initial nondeductible contribution to a Traditional IRA is not taxed again, the conversion itself may create taxable income.

The IRS uses the pro-rata rule when calculating taxes. This rule looks at the total value of all your Traditional, SEP, and SIMPLE IRAs combined, not just the account you are converting. If you have pre-tax money in any of these accounts, a portion of the conversion will likely be taxable.

For example, if you have both pre-tax and after-tax IRA funds, you cannot convert only the after-tax amount to avoid paying taxes. The IRS requires the conversion to be prorated across all balances.

Because the tax impact can be complex and varies from one person to another, WealthRabbit recommends consulting a tax professional before completing a Backdoor Roth IRA conversion.