How to Make a Backdoor Roth IRA Contribution

In this video, John Bowens explains how to make a backdoor Roth IRA contribution and what factors into how much you can contribute and what is taxable.
Start a conversation with an IRA Counselor to discover which account may be best for you: www.trustetc.com/lp/consultat...
0:00 Intro
1:13 What is Modified Adjusted Gross Income (MAGI)?
2:39 What are the MAGI restrictions?
6:31 What are non-deductible IRA contributions?
9:14 Pro-Rata Rule example
11:05 How much income is too much to contribute directly into a Roth IRA?
15:27 How to do a backdoor Roth IRA contribution from a Traditional IRA
19:45 Frequently asked questions about Backdoor Roth IRAs
A backdoor Roth IRA contribution is an industry term that refers to a contribution to a traditional IRA that you immediately convert over to a Roth IRA.
Modified adjusted gross income (MAGI) is adjusted gross income with certain exclusions added. Your MAGI will determine whether you can contribute directly to your Roth IRA or if you will need to make a backdoor contribution.
Income restrictions will depend on if you file taxes as single, married filing jointly, or married filing separately.
If you are a single filer:
- MAGI below $129,000 means you can make a full contribution to your Roth IRA
- MAGI between $129,000 and $144,000 means you can make a partial contribution
- MAGI above $144,000 means you cannot make a contribution
If you are married filing jointly:
- MAGI below $204,000 means you can make a full contribution
- MAGI between $204,000 and $214,000 means you can make a partial contribution
- MAGI over $214,000 means you cannot make a contribution
If you are married filing separately:
- MAGI under $10,000 means you can make a full contribution
- MAGI over $10,000 means you cannot make a contribution
Non-deductable IRA contributions are contributions to a traditional IRA that do not provide tax deductions.
The Pro Rata Rule is the portion of your contribution that is non-deductible and is not taxable in a traditional IRA. The Pro Rata Rule also depends on how you file taxes and your MAGI as well as whether you or your spouse have a retirement plan through your employer.
Single filer:
- MAGI below $68,000 means you can take a full deduction
- MAGI between $68,000 and $78,000 means you can take a partial deduction
- MAGI above $78,000 means you cannot take a deduction
Married filing jointly where you have an employer retirement plan:
- MAGI below $109,000 means you can take a full deduction
- MAGI between $109,000 and $129,000 means you can take a partial deduction
- MAGI over $129,000 means you cannot take a deduction
Married filing jointly where your spouse has an employer retirement plan:
- MAGI below $204,000 means you can take a full deduction
- MAGI between $204,000 and $214,000 means you can take a partial deduction
- MAGI over $214,000 means you cannot take a deduction
Married filing separately:
- MAGI below $10,000 means you can take a full deduction
- MAGI over $10,000 means you cannot take a deduction
The Pro Rate Rule applies to people with existing traditional IRAs and will tell you what is and isn't taxable.
If you have a Roth-component to your employer retirement plan, there are no MAGI restrictions.
Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

[@feroxc4421]

How to you report your taxes if you convert both the $6000 after tax IRA and the $10,000 pre-tax IRA in the same year?

[@claritzagarcia1233]

Thank you for the explanation, however, I am still a little confused, I currently have 457 plan from my employer and according to my income I have to do backdoor if I want to contribute to Roth IRA, can you elaborate more about if you only have a retirement plan from you work. Thanks

[@equitytrustcompany]

Hi Claritza, thanks for your question. We can't give tax or legal advice, but this might help answer your questions about how a Backdoor Roth works. www.trustetc.com/blog/what-is-backdoor-roth-ira/

[@XXX-tc8ef]

Are there taxes withheld when converting from the traditional to ROTH?

[@alrocky]

Did you file for a tax deduction for that traditional IRA?