Back Door Roth Ira Conversion Limits

A backdoor roth ira can make sense in the same scenarios any roth ira conversion makes sense.

Back door roth ira conversion limits.

When converting an ira to a roth ira some people attempt what is called the backdoor roth ira. A conversion to a roth ira results in taxation of any untaxed amounts in the traditional ira. Return to iras faqs. The backdoor roth ira is one of those options but there are state and federal tax pitfalls to converting money from a traditional ira or a qualified retirement account such as a 401 k to a.

Another important distinction is that a high income does not prevent you from making roth conversions the income limits were lifted in 2010 and i took advantage by making a mega roth conversion when it was believed the income limits would be reinstated. A mega backdoor roth offers the opportunity for some investors to contribute up to an extra 37 000 for 2019 to a roth ira via their employer s 401 k. While you can t contribute to a roth ira if your income exceeds the limits set by the irs you can convert a traditional ira into a roth a process that s sometimes referred to as a backdoor. However there are still no income limits and hence the backdoor remains wide open.

A roth ira currently has an income limit of 135 000 for single tax filers and 199 000 for married couples joint filing. The conversion is reported on form 8606 pdf nondeductible iras. Therefore you shouldn t ask your ira custodian or trustee for a backdoor roth ira contribution. A traditional ira has no such limits which is what makes the backdoor roth such an appealing route for high earners.

Income limits are attached to the ability to contribute to a roth ira each year. From there a roth ira conversion takes place letting those high income investors take advantage of tax free growth and future distributions without having to pay income taxes later on. The backdoor roth ira contribution is a strategy and not a product or a type of ira contribution.