Interest incurred during Backdoor Roth Conversion

[VAer]

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.

[dmertz]

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.

[fanfare]

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

@VAer 

[shubham1310]

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