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Level 6

Question

Interest incurred during Backdoor Roth Conversion

3 replies
55 views

For example, if traditional IRA balance is $0 before Backdoor Roth Conversion, then I contribute $6500 (non-deductible) to traditional IRA for year 2023. It will take a few business days for contribution to settle before withdraw. A few days later, the balance becomes $6501 due to interest, then I do backdoor roth conversion on full balance $6501.

Will it cause any issue when converting more money($6501) than contribution($6500)? How to deal with incurred interest?

Thanks.

Not A Product Question

Level 15

The $1 of earnings while in the traditional IRA will add $1 to your taxable income when converted to Roth. The taxable amount will be calculated on Form 8606.

Level 15

you have to convert the whole thing to keep your backdoor roth strategy working in future years

Level 3

@fanfare Can you explain how the remaining year end interest can make the backdoor strategy complicated