Back Door Roth Ira Conversion Limits

When converting an ira to a roth ira some people attempt what is called the backdoor roth ira.

Back door roth ira conversion limits.

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. 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. However there are still no income limits and hence the backdoor remains wide open. A conversion to a roth ira results in taxation of any untaxed amounts in the traditional ira.

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. A mega backdoor roth takes this even further. A traditional ira has no such limits which is what makes the backdoor roth such an appealing route for high earners. The backdoor roth ira contribution is a strategy and not a product or a type of ira contribution.

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. Return to iras faqs. Therefore you shouldn t ask your ira custodian or trustee for a backdoor roth ira contribution. See publication 590 a contributions to individual retirement arrangements iras for more information.

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. The conversion is reported on form 8606 pdf nondeductible iras. A backdoor roth ira can make sense in the same scenarios any roth ira conversion makes sense.