This tax planning strategy would get a boost from Tax Reform 2.0

Personal Finance


Be aware that backdoor Roth conversions from nondeductible contributions can be tricky.

If you have other IRAs, including a SEP and SIMPLE IRAs, with pretax dollars in them, you could face income taxes based on the overall value of all the accounts. This is known as the prorata rule.

Further, if you’re due to take an RMD from your IRA in a given year, you can’t convert that amount, said Slott.

You must take the RMD from the IRA first, then make the Roth conversion.

“It’ll give accountants a lot of work,” Slott said. “They need to make sure not to convert the RMD. The money still needs to come out whether you do the backdoor Roth or not.”

Roth IRAs themselves aren’t subject to required minimum distributions.



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