You are correct that you can convert IRA to ROTH. You will not pay any taxes up to the amount of non deductible contribution assuming there are no pre-tax IRA contributions. If you have pre-tax and after-tax contributions into any type of IRA, the IRS applies a pro-rata rule to determine the taxable amount. The pro-rata rule requires that any Roth conversion be treated as coming proportionally from all of your Traditional, SEP, and SIMPLE IRA balances combined. Please note that any earnings generated on after tax contributions are taxable. Earnings are tax free only after you convert them to ROTH.
In order to minimize taxes, you have to look at your other sources of income to see what will be your tax rate. Once you know the tax rate and it is low, you can determine how much you can convert and still stay in the same tax bracket.
Here are tax brackets for tax year 2025 from IRS.
"Marginal rates. For tax year 2025, the top tax rate remains 37% for individual single taxpayers with incomes greater than $626,350 ($751,600 for married couples filing jointly). The other rates are:
- 35% for incomes over $250,525 ($501,050 for married couples filing jointly).
- 32% for incomes over $197,300 ($394,600 for married couples filing jointly).
- 24% for incomes over $103,350 ($206,700 for married couples filing jointly).
- 22% for incomes over $48,475 ($96,950 for married couples filing jointly).
- 12% for incomes over $11,925 ($23,850 for married couples filing jointly).
- 10% for incomes $11,925 or less ($23,850 or less for married couples filing jointly)."
You can also use our 2024 TurboTax desktop software or 2025 TurboTax online (not available yet) to estimate your tax rate and estimate the amount of conversion. If you used TurboTax online for 2024, you can download desktop product and create dummy return to run the numbers. Our 2025 desktop will come out in few weeks. You can purchase that from our website. See below.
https://turbotax.intuit.com/personal-taxes/cd-download/
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