1. What is IRA to Roth Rollover Tax?

IRA to Roth rollover tax is the amount of tax you pay when converting funds from a traditional IRA to a Roth IRA. This tax is calculated on the taxable portion of the conversion amount, which represents the pre-tax contributions and earnings in your traditional IRA.

2. How Does the Calculator Work?

The calculator uses the IRA to Roth rollover tax formula:

Where:

• \( Rollover\ Amount \) — Total amount being converted from IRA to Roth (USD)
• \( Basis \) — After-tax contributions in your traditional IRA (USD)
• \( Tax\ Rate \) — Your marginal tax rate for the conversion (%)

Explanation: The formula calculates the taxable amount by subtracting your basis (after-tax contributions) from the total rollover amount, then applies your tax rate to determine the tax liability.

3. Importance of Rollover Tax Calculation

Details: Accurate rollover tax calculation is crucial for financial planning, understanding the true cost of conversion, and avoiding unexpected tax bills. It helps determine if a Roth conversion makes financial sense for your situation.

4. Using the Calculator

Tips: Enter the total rollover amount in USD, your basis (after-tax contributions) in USD, and your expected tax rate as a percentage. All values must be valid non-negative numbers with tax rate between 0-100%.

5. Frequently Asked Questions (FAQ)

Q1: What is basis in traditional IRA?
A: Basis represents the after-tax contributions you've made to your traditional IRA that have already been taxed and won't be taxed again upon conversion.

Q2: How do I determine my tax rate for conversion?
A: Use your marginal tax rate for the year of conversion. Consider consulting a tax professional for accurate rate determination based on your total income.

Q3: Are there any exceptions to paying conversion tax?
A: If your traditional IRA consists entirely of after-tax contributions (basis equals total amount), no tax is due. However, pro-rata rules may apply if you have both pre-tax and after-tax funds.

Q4: When is the conversion tax due?
A: Tax on Roth conversions is due in the tax year when the conversion occurs. You may need to make estimated tax payments if the conversion creates significant tax liability.

Q5: Can I reverse a Roth conversion?
A: Roth conversions were historically reversible through recharacterization, but tax law changes have eliminated this option for conversions after 2017. Conversions are now irreversible.