Backdoor Roth IRA conversion - pro-rata caculation

Forum|Forum|6 years ago
March 2, 2020
1 reply
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I have $11,000 as my total basis in traditional IRAs (non-deductible contributions). The value of all my traditional IRAs (because of the 401(k) pre-tax funds rollover) is $160,697 as of 12/31/2019. In 2019 I made a conversion to Roth in the amount of $7,947. To determine how much of $7,947 will be taxable, I did the following calculations:

$11,000 / $160,697 = 6.85% - that's non-taxable share of the converted amount

100% - 6.85% = 93.15% - that's taxable share of the converted amount

$7,947 * 93.15% = $7,403 - that's the taxable amount of the converted funds

However, Turbotax calculated the taxable amount to be $7,429. The difference is small - $26, but it's still there - I would like to know if I am doing my calculations wrong as I can't attribute this difference to a rounding error.

Not A Product Question

dmertz

Level 15

You calculated incorrectly by failing to add the conversion amount to the year end value used in the denominator. The correct calculation of the nontaxable amount is:

$7,947 * $11,000 / ($7,947 + $160,697) = $518

resulting in a taxable amount of

7,947 - $518 = $7,429

exactly in agreement with TurboTax's calculation.