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Retirement tax questions
Yes, if you have pre-tax funds in one of your Traditional/SEP/SIMPLE IRAs on December 31, 2024, then the the pro-rata rule applies. This means that with each distribution/ conversion you will have a taxable and nontaxable part.
The Backdoor Roth only works if your traditional/SEP/SIMPLE IRAs are empty. If you plan to use this strategy in the future you might want to think about a reverse rollover where you rollover IRA money to a company plan, like a 401(k). Only pre-tax funds can be rolled from an IRA to a company plan. Therefore, you would isolate the basis and could start the Backdoor Roth procedure fresh. But it only works if your employer allows it, not all plans do.
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March 17, 2025
6:44 AM