The Pro Rata Rule for Roth Conversions

April 1, 2022

Roth conversions benefit clients by providing a source of tax-free income in retirement that can reduce income taxes and provide greater flexibility when it comes to withdrawing retirement funds. While Roth conversions typically are made with pretax dollars and generate current tax liability when converted, it is possible that portions of the conversion could be tax-free if the client’s IRA contained nondeductible contributions. When converting funds from a traditional IRA, the pro rata rule is used to determine what percentage of the funds in the IRA were from nondeductible contributions. The proportion of nondeductible contributions will reduce the taxability of Roth conversions from the account.

At Brandywine Oak, we guide our clients through the intricacies of advanced tax-planning to maximize their family’s long-term after-tax returns. To learn more about the pro rata rule, please read

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