Hello,
I am considering the conversion of a Traditional IRA to a Roth IRA and looking for guidance on how to calculate the tax obligation.
The Traditional IRA was opened and funded in November 2017 via a rollover of $30,000. A non-deductible $5,500 contribution was made in March 2019 for calendar year 2018. The account grew via two ETF funds and resulting dividends to $41,000 this January, before falling back to $35,000 today.
I believe the pro-rata rule applies...Is that correct...or...Is there an alternative?
According to an Investopedia article on the pro-rata rule:
Tax Free Percentage = Total Non-Deductible Contributions / (Sum of Year-End Value of all IRA Amounts + Conversion Amount)
The Tax Free Percentage is...$5,500 / ($35,000 + $35,000) = 7.9%...Thus...the Taxable Percentage would be 92.1%.
Am I on the right track?
Thanks 🙂
