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2026 tax year · IRS Notice 2025-67; IRC §1411(b)

Backdoor Roth & pro-rata rule calculator

See how the pro-rata rule taxes your backdoor Roth on Form 8606, and compare three ways to make future conversions tax-free. Every formula is on the methodology page.

IRA balances before converting

Pre-tax dollars only. Don't include your after-tax basis or this year's non-deductible contribution.

SIMPLE IRAs can't be rolled out for 2 years after the first deposit.

Last year's Form 8606 line 14, plus this year's non-deductible contribution.

Backdoor conversion

Standard 2026 IRA contribution limit is $7,500 ($8,600 if 50+).

Household and baseline income

Wages, salary, interest, pensions.

Conversion income stacks below LTCG and can push gains out of the 0% bracket.

Clearance and 401(k) rollover

Allows rolling pre-tax IRA funds into 401(k) by Dec 31 to eliminate pro-rata tax.

Years to convert remaining pre-tax balance in equal annual slices to minimize bracket spikes.

Inflation

Discounts future amounts by the inflation rate below.

Excluded balances (illustration)

Not part of the pro-rata pot while it stays in the plan.

Taxable slice (Form 8606)

$6,316

84.2% of this conversion is taxable under §408(d)(2) aggregation.

Tax-free basis recovered

$1,184

15.8% basis ratio. $6,316 basis carried forward to next year.

Federal tax on conversion

$1,480

Effective tax rate of 19.7% on this conversion.

Recommended clearance

Reverse rollover to 401(k)

Roll $40,000 into 401(k) by Dec 31 to make this year's backdoor tax-free.

All your traditional, SEP, and SIMPLE IRAs count as one pot on Dec 31. A spouse's IRAs and active 401(k)s don't.

Traditional IRA$40,000After-tax basis$7,500§408(d)(2) Aggregate Pot$47,50015.8% basis ($7.5K)Taxable conversion$6,316Tax-free conversion$1,184Remaining pre-tax IRA$33,684Remaining basis$6,316

Why the pro-rata rule surprises people

When high earners exceed direct Roth IRA income phase-outs ($153,000–$168,000 for single filers; $242,000–$252,000 for MFJ in 2026), they often execute a two-step backdoor Roth strategy: contribute non-deductible dollars to a Traditional IRA and immediately convert that balance to a Roth IRA.

However, if you have any pre-tax money in a Traditional, Rollover, SEP, or SIMPLE IRA on December 31 of the conversion year, IRC §408(d)(2) treats all your non-Roth IRAs as a single aggregated pot. You cannot cherry-pick or convert "just the after-tax basis." Instead, every dollar converted is taxed proportionally based on the ratio of pre-tax dollars to total IRA assets.

Which accounts count under IRC §408(d)(2) aggregation

A frequent misconception is that opening a separate "clean" Traditional IRA shields you from the pro-rata rule. The IRS looks across all IRA custodian accounts in your name.

Included in pro-rata aggregation

  • • Traditional IRAs (pre-tax & after-tax)
  • • Rollover IRAs (from previous 401k plans)
  • • SEP IRAs (Simplified Employee Pension)
  • • SIMPLE IRAs (Savings Incentive Match Plan)

Completely excluded (safe)

  • • Active employer 401(k), 403(b), & 457(b) plans
  • • Solo 401(k) / Individual 401(k) plans
  • • Roth IRAs & Designated Roth 401(k)s
  • • Spouse's IRAs (individual separation)

Spousal separation: IRAs are Individual Retirement Arrangements. On a Married Filing Jointly return, Spouse A having a $200,000 Traditional IRA does not impact Spouse B's backdoor Roth conversion in any way.

Three strategies to eliminate the pro-rata tax

If you have pre-tax IRA balances, you have three primary strategic options to clear the obstruction and restore clean, 100% tax-free backdoor Roth conversions:

1. Employer 401(k) reverse rollover (recommended)

Roll all pre-tax dollars from your Traditional, SEP, or SIMPLE IRAs into your active employer 401(k) or 403(b) plan before December 31. Because 401(k) plans are excluded from IRA aggregation, your year-end pre-tax IRA balance becomes exactly $0. Your remaining after-tax basis in the Traditional IRA can then be converted to Roth completely tax-free.

2. Solo 401(k) rollover (for 1099 or business income)

If your W-2 employer plan does not accept incoming rollovers, or if you are self-employed or have 1099 side income, you can establish a Solo 401(k) that permits incoming IRA rollovers. Moving your pre-tax IRA money into the Solo 401(k) isolates it from §408(d)(2) aggregation without triggering income taxes.

3. Full lump-sum Roth conversion

If your pre-tax IRA balance is relatively small, or if you are in a temporary low-income valley (such as an early retirement gap year or sabbatical), converting the entire pre-tax balance in one tax year pays the tax once up front and wipes out the pro-rata drag for all future backdoor conversions.

How Form 8606 calculates the pro-rata tax

Every year you make a non-deductible IRA contribution or Roth conversion, IRS Form 8606 calculates the taxable vs. non-taxable split using an exact arithmetic formula:

Form 8606 Line-by-Line Logic:

1. Total Basis (Line 3) = Line 1 (Current Contribution) + Line 2 (Prior Basis)

2. Total IRA Pot (Line 9) = Line 6 (Dec 31 value of all traditional, SEP, and SIMPLE IRAs, after-tax dollars included) + Line 7 (Distributions) + Line 8 (Conversions)

3. Non-Taxable Ratio (Line 10) = Line 5 ÷ Line 9, where Line 5 is Line 3 minus any contributions for the year made the following January 1–April 15 (Line 4)

4. Tax-Free Conversion (Line 11) = Line 8 × Line 10

5. Taxable Conversion (Line 18) = Line 8 − Line 11

The December 31 snapshot trap: Line 6 uses your balance on December 31 of the tax year. If you convert $7,500 in January and roll an old $100,000 401(k) into a Rollover IRA in November of the same year, that year-end balance will retroactively make ~93% of your January conversion taxable on Form 8606.

What that looks like in dollars

In the starting scenario above — a single filer with $40,000 of pre-tax Traditional IRA balance who contributes $7,500 of after-tax basis and converts $7,500:

The total IRA pot is $47,500. The non-taxable basis ratio is only 15.8%. Converting $7,500 yields $1,184 of tax-free basis recovery and $6,316 of taxable ordinary income, costing $1,480 in incremental federal tax.

By executing a reverse rollover into an employer 401(k) before December 31, the year-end pre-tax balance becomes $0, turning that same $7,500 conversion into a 100% tax-free transaction.

Common questions

What is the pro-rata rule for backdoor Roth conversions?

Under IRC §408(d)(2), the IRS views all of your non-Roth IRAs (Traditional, SEP, and SIMPLE IRAs) as one combined pot on December 31 of the tax year. When you convert any amount to a Roth IRA, you cannot choose to convert only your after-tax basis. Instead, every conversion is taxed in proportion to the ratio of pre-tax dollars to total dollars across all of your IRAs.

How does Form 8606 calculate the taxable percentage?

Form 8606 divides your total after-tax basis (Line 5) by the sum of your December 31 IRA balance plus all conversions and distributions made during the year (Line 9). That non-taxable ratio (Line 10) determines what fraction of your conversion is tax-free basis recovery, while the remaining share is treated as taxable ordinary income.

Does a 401(k) or 403(b) count toward the pro-rata rule?

No. Employer-sponsored retirement plans like active 401(k), 403(b), 457(b), and Solo 401(k) plans are qualified plans under IRC §401, not IRAs, and are completely excluded from §408(d)(2) aggregation. This exclusion is what makes the reverse rollover strategy work: by rolling pre-tax IRA money into an active 401(k) before December 31, your year-end IRA balance becomes zero, making your backdoor conversion 100% tax-free.

Do a spouse’s IRAs trigger the pro-rata rule on a joint return?

No. IRAs are Individual Retirement Arrangements and are aggregated strictly per individual, even on a Married Filing Jointly (MFJ) tax return. One spouse having a large pre-tax Traditional IRA has zero effect on the other spouse’s ability to perform a clean, 100% tax-free backdoor Roth conversion.

What is a reverse rollover, and what are its requirements?

A reverse rollover is rolling pre-tax dollars from a Traditional, SEP, or SIMPLE IRA into an active employer 401(k) plan. To make your backdoor conversion tax-free, the rollover out of the IRA must be completed by December 31 of the conversion year, your employer plan must accept incoming rollovers, and only pre-tax money can move to the 401(k) — your after-tax basis must stay in the IRA to convert tax-free.

What happens if I have a SIMPLE IRA or SEP IRA?

Both SEP IRAs and SIMPLE IRAs are subject to §408(d)(2) aggregation and count as part of your pre-tax pot. In addition, SIMPLE IRAs have a strict 2-year waiting rule from the first day contributions are deposited: rollovers to a Traditional IRA or 401(k) during the first 2 years trigger a 25% early distribution penalty unless rolled to another SIMPLE IRA.

What is the December 31 snapshot rule for backdoor Roth conversions?

The IRS determines your pro-rata ratio based on your total non-Roth IRA balances on December 31 of the calendar year in which the conversion occurs — not the date you made the contribution or conversion. Even if you convert in January, having a pre-tax IRA balance on December 31 will trigger pro-rata taxation on that January conversion.

Is it better to do a lump-sum conversion or keep the status quo?

It depends on your tax bracket and pre-tax balance. Converting a large pre-tax balance in a single year pushes income into higher federal tax brackets. However, maintaining the status quo leaves you paying ongoing tax drag every year on your backdoor conversions. This calculator compares the multi-year cumulative cost curves and identifies the exact breakeven crossover year.

Where to go from here

This tool prices one individual's pro-rata tax and clearance options. These cover the rest of the decision.