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Feature. Backdoor Roth IRA. 401(k)plan. Contribution Limit for 2024. $7,000 or $8000 (if 50 or older) $23,000 for employee $69,000 for employee and employer
Using the pro-rata rule, the nontaxable portion of that conversion would be $6,250 (25% x $25,000), and the rest would be added to her taxable income for the year.
Whether you already have both pre-tax and after-tax amounts in the account, making distributions subject to the IRS pro-rata rule. To sum up, with a mega backdoor Roth, you can contribute up to an ...
Can be converted to a Roth IRA, typically for backdoor Roth IRA contributions. Taxes need to be paid during the year of the conversion. Also, the non-basis portion can be rolled over into a 401(k), if allowed by the 401(k) plan. Changing Institutions Can roll over to another employer's 401(k) plan or to a rollover IRA at an independent institution.
Beware the pro-rata rule on conversions If you have traditional IRA accounts with deductible contributions, you’ll need to factor that in if you convert any nondeductible amounts into a Roth IRA.
If you’re making $275,000 a year, you can’t contribute to a Roth IRA due to income limits. However, a backdoor conversion can allow a high earner to sock away unlimited sums in a Roth account ...
Ongoing transfers can also help get around the Roth IRA’s cooldown period, also known as the 5-year rule. Long-Term Tax Benefits of a Backdoor Roth A Roth IRA offers several benefits.
(Single filers with incomes over $161,000 and married couples filing jointly with incomes over $240,000 in 2024 can’t contribute to a Roth IRA.) This conversion strategy is known as a backdoor ...