topic Total Basis for Backdoor Roth IRA in Retirement tax questions

Total Basis for Backdoor Roth IRA

himanshu983 — Fri, 14 Mar 2025 20:17:59 GMT

For the last 4 years, I have been performing backdoor Roth IRA.

I contributed the max allowed ($6500/$7000) AFTER-TAX dollars to Traditional IRA, and then converted all of that to Roth IRA each year. I have an $ amount in Total Basis (including in prior returns). Should the Total Basis always be $0? Have I been doing it wrong all these years?

Re: Total Basis for Backdoor Roth IRA

DanaB27 — Sat, 15 Mar 2025 15:54:02 GMT

If you make the nondeductible contribution and a full conversion in the same year then your basis on line 14 should be $0. The only exception would be if had a loss before you converted the funds then it is possible to have a basis on line 14.

If you made the contribution for the previous year and the convert it in the current year then you would have a basis on line 14 on the previous Form 8606 that would be carried over to line 2 of the current Form 8606.

Note, this assumes your traditional IRAs were empty before starting the backdoor Roth procedure.

Re: Total Basis for Backdoor Roth IRA

fanfare — Sat, 15 Mar 2025 20:36:14 GMT

"Have I been doing it wrong all these years?"

Not if you noticed that you are paying tax on the taxable part of those conversions. (Form 1040 Line 4b)

@himanshu983

Re: Total Basis for Backdoor Roth IRA

himanshu983 — Sun, 16 Mar 2025 19:51:18 GMT

I make after-tax dollar contributions (up to annual limit) to Traditional IRA, and then move all of it to Roth IRA after a few days. I have been doing this for a few years. So should there be a taxable part?

Re: Total Basis for Backdoor Roth IRA

DanaB27 — Mon, 17 Mar 2025 08:44:12 GMT

If you didn't have any earnings before converting the funds then there shouldn't be a taxable part, assuming you had no other pre-tax funds in your traditional/SEP/SIMPLE IRAs.