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Reply to "Is it true that you can't have a regular IRA and do a back door Roth?"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous]You can contributed, but you'll be subject to the pro-rata rule. [/quote] For the unknowledgeable, could you explain the pro-rata rule or point to a trust worthy online explanation? I can google, sure. But just hoping for a little nudge of help. Thanks.[/quote] The IRS will consider all of your traditional IRAs as one IRA so if you have an IRA with $95k in it that was funded with pre-tax contributions you can’t open a new IRA with $5k of after-tax money and say “I am just converting this $5k of after tax money and I don’t owe any tax on it”. Instead, the IRS will say that when we look at all of your IRAs together 95% of your IRA is pretax so 95% of that $5k was actually pretax money and you have to pay tax on that amount ($4750) as income when you convert it. It’s called pro rata because you have to figure out the % of your total IRA money that is pretax and that % is how much is taxable for your conversion. [/quote]
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