How does a back door roth conversion work? Wife and I are over the income limits for the Roth or traditional ira. If I fund a non deductible ira with 6k, my research is telling me I’d have to..

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Look at the % this is of all of my traditional ira money and pay the taxes up front on whatever % that is. So. Here’s my exact situation.

15k in pre tax contributions
3k in gains on the pre tax contributions
12k in post tax contributions (because income level was too high.. I intended to back door convert but never did)
2k in gains on the post tax money
6k in proposed post tax new money

So the total is 38k. I believe the 15+3+2 is taxable and the 12+6 is not taxable.

I believe the max I can back door convert is 6k per year. So is it correct that I will need to pay tax on 20/38or about 53% of the 6k if I want to convert it? Assuming these are all long term gains, does that factor in as well? So I’d pay regular income tax on the 15 and long term cap gains on the 3+2?

The info out there is kind of confusing. Like some sources say there is no cap on conversion (so I can convert the entire 38k which would be preferible??).

Also. Most sources do say that I’d need to apply the % to the taxable amount. But I haven’t found where they differentiate between long term and short term gains.

Finally these funds are in a 4 different accounts at 2 different brokerage firms. Silly question, but how does the tax man know that I have all these accounts and what my balances/gains are?

These are all perfect questions for a tax professional... but a couple things that jump out... you MIGHT need to consolidate everything then convert, because I THINK you can only convert once per year... however, there is no cap for conversions. Yes your conversion will be taxed pro rata but great question on tax treatment of short vs. Long term cap gains.

Good luck OP!

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