Similar to another question: Interest accrued before backdoor roth ira conversion, but I want to highlight a specific nuance of my situation.

In 2023, I contributed the maximum $6500 to my Traditional IRA, and before I could convert it to my Roth, it grew to $6502. Not knowing exactly what to do, I converted $6500 to my Roth, leaving $2 in my Traditional IRA.

Now when I go through TurboTax, I have to declare my 2023 ending balance for the Traditional, which is $2. Is that going to be my basis going forward?

Follow-up question... I will add the maximum $7000 to my Traditional IRA in 2024, to be moved to my Roth via the backdoor. When I go to convert that amount, can I move over $7002, (or whatever my entire Traditional balance is at that point)? Since the gains in the Traditional are not taxable?

  • 1
    Since the gains in the Traditional are not taxable? - the gains in the traditional account are very much taxable.
    – littleadv
    Mar 5 at 16:50

1 Answer 1


Due to the pro-rata rule, 6500/6502 of your conversion is basis, and 2/6502 of your conversion is from earnings and taxable. 6500/6502 * $6500 rounds to $6498 of the conversion that was from basis, and 2/6502 rounds to $2 of the conversion that was taxable, and needs to be added to your $2023 taxable income. Earnings in Traditional IRA are always pre-tax, and need to be taxed upon withdrawal or conversion. $2 of basis would be left in the Traditional IRA, which can be used when you convert the Traditional IRA the following year, i.e. once you contribute the $7000 non-deductible contribution in 2024, you would have $7002 in basis, and if you convert the entire Traditional IRA, you would only need to pay tax on (value converted - $7002).

However, form 8606 line 10, which calculates the fraction of the conversion that is basis, only requires you to enter it as a decimal "rounded to at least 3 decimal places". 6500/6502 is about 0.99969, and if you round it to just 3 decimal places, it rounds to 1.000, which would mean that the entire conversion was from basis, none of the conversion in 2023 is taxable, and no basis is left in the Traditional IRA (meaning that in 2024, if you contribute $7000 non-deductible and convert your entire Traditional IRA, you pay tax on (value converted - $7000)). I don't know if TurboTax rounds it to 3 or 4 decimal places, so either result is possible.

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