• Skip to main content
  • Skip to primary sidebar

Ask Liz Weston

Get smart with your money

  • About
  • Liz’s Books
  • Speaking
  • Disclosure
  • Contact

Q&A: IRAs and tax considerations

March 22, 2021 By Liz Weston

Dear Liz: I’ve been researching the backdoor Roth IRA and I am finding some conflicting information regarding taxes owed on the conversions. I have two sizable rollover IRAs and one small ($1,600) traditional IRA. Can I make an after-tax contribution to the traditional IRA and convert that to a Roth and pay tax only on that IRA or do I have to consider all three IRAs?

Answer:
Sorry, but you have to consider all three. The tax on your conversion will be based on the pre-tax portion of all your IRAs combined, not just the IRA where you make your contribution.

Backdoor Roths allow people to get money into a Roth when their incomes are too high to make a direct contribution. Instead, they contribute to a traditional IRA and convert that to a Roth because conversions don’t have income limits. Conversions require paying taxes proportionately on your pre-tax contributions and earnings, however, so the technique may not be advisable when you have sizable pre-tax IRAs that will trigger a large tax bill.

Related Posts

  • Tax bills for inherited IRAs

    Dear Liz: I am 64. My grown children, ages 23 and 25, are the beneficiaries…

  • Q&A: Reducing taxes in retirement

    Dear Liz: It appears required minimum distributions will force me to take an additional $3,500…

  • Q&A: IRAs, pensions and taxes

    Dear Liz: I contributed to an IRA during my working years. I’m now retired. Both my…

  • Q&A: Taxes on retirement account withdrawals

    Dear Liz: I would love to give my grandchildren money, but I don’t want to…

Filed Under: Q&A, Retirement, Taxes Tagged With: IRA, q&a, Taxes

Primary Sidebar

Search

Copyright © 2025 · Ask Liz Weston 2.0 On Genesis Framework · WordPress · Log in