5

Are normal backdoor Roth IRA and mega backdoor Roth IRA still possible in 2018 tax plan? I had troubles figuring it out due to number of different plans.

1

The new tax law has no impact on either the backdoor Roth IRA or the mega backdoor Roth. Tough to find a definitive source on something that didn't change, but here's a post from Mad Fientist confirming this.

As mentioned in that link though, the new tax law did remove the ability to recharacterize Roth conversions. So if you do a backdoor Roth and your income ends up being much lower than expected, you can't undo the conversion and take the Traditional IRA deduction instead.

  • your link includes the following: "The new tax legislation still allows for the Backdoor Roth but the only difference is, you can’t undo the Traditional-to-Roth conversion after you execute it." This can be a big deal. – mhoran_psprep Jan 1 '18 at 18:19
  • I suppose if your income ends up being much lower than you expect, you couldn't undo the conversion and take the Traditional IRA deduction. Mind if I edit my answer to add this? – Craig W Jan 1 '18 at 18:36
  • Yes please edit. This is why quoting from a linked source is beneficial. The issue is that if you decide in January 2018 to convert, and the market crashed in July 2018, you used to be able to switch back, and then reconvert again thus lowering your gains subject to taxation. That option is gone with the new tax law. – mhoran_psprep Jan 1 '18 at 18:38
  • 1
    If you're converting in January 2018 as part of a backdoor Roth IRA there should be minimal gains and thus no reason to recharacterize. Are you sure you're not thinking of the Roth IRA horse race strategy, also discussed on that page? – Craig W Jan 1 '18 at 18:45
  • 1
    Right, but I think you're misunderstanding when you'd want to recharacterize a backdoor Roth conversion. – Craig W Jan 1 '18 at 18:50
1

The House Conference Report for the Tax Cuts and Jobs Acts has footnotes in it that explicitly permit the back door Roth:

Although an individual with AGI exceeding certain limits is not permitted to make a contribution directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA.

source

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.