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So here is the scenario.

I have 600K in 401K Rollover Traditional IRA (Pre-Tax) I have 30K in Roth IRA

I want to contribute to Roth IRA but my income is too high. If I take part of money every year ($20K) and convert from Traditional IRA (Pre-Tax) to Roth IRA then I will have to pay tax on it.

What if I open a new Traditional IRA account? I contribute $6000 (limit) POST TAX money to it and then use the backdoor to convert that account to Roth IRA. In this way, I only have to pay tax on the gains since this is post tax and I have already paid tax on it.

Is this possible?

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A separate traditional IRA won't allow you to avoid so-called "pro rata" taxes on a Roth conversion. In general the IRS treats multiple accounts of the same type as one, and this is certainly the case here. Look at Form 8606 - Nondeductible IRAs, where you would report your non-deductible contributions and conversions. For line 6 it says:

Enter the value of all your traditional, SEP, and SIMPLE IRAs as of December 31, 2020, plus any outstanding rollovers.

The only way to do a tax-free backdoor Roth in your situation is if you can rollover your traditional IRA into a qualified plan, like a 401(k).

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  • Thanks again Craig! Looks like I will just have to contribute to Traditional IRA from next year and pay the taxes when I retire. I think my income will be lower when I retire but at this moment, I have no idea.
    – Mary Doe
    Jul 5, 2021 at 15:22

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