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I have two Traditional IRA accounts and one Roth account at a stock broker. I'm early 60's, retired in 2019, married and not receiving social security yet. We have taken some distributions for living expenses from the Traditional IRA's but not old enough for RMD's.

The Traditional IRA accounts have commingled funds from Traditional post tax/non-deductible contributions and gains as well as Rollover/Pretax funds from 401k's, etc., Over the years I contributed approx $50,000 with "post tax" dollars to the Traditional IRA (last contribution was for tax year 2018). We filed IRS form 8606 during the years the contributions were made so the basis is shown there. There are gains from stock holdings and transactions in these accounts.

Can I convert $50,0000 (to match the post tax contributions) to the Roth IRA without creating a taxable event? Since this amount was from post tax dollars it seems there would be no new tax due on this amount. Or is there a proration calculation or something else involved?

Thank you.
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No, you can't just convert the basis to the Roth tax-free. The amount converted is treated like a regular distribution. The percentage of the balance in the account that represents the basis is tax-free. The calculation of the taxable and tax-free portion is shown on the same Form 8606.

Bill
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Can I convert $50,0000 (to match the post tax contributions) to the Roth IRA without creating a taxable event? Since this amount was from post tax dollars it seems there would be no new tax due on this amount. Or is there a proration calculation or something else involved?

As Bill already pointed out, under current law, you must pro-rate the conversion. And if the House version of the Build Back Better plan isn't changed and it passes (2 very large ifs, I know), after Jan 1, 2022, you actually won't be able to do conversions of those after-tax amounts at all - only pre-tax amounts.

I will point out for anyone who has after-tax contributions in an IRA, wants to convert them, and is still employed at a company with an employer plan that accepts roll-ins from an IRA, you do have a short window of opportunity before 2022 to segregate the after-tax contribution amounts from the pre-tax amounts by rolling over all pre-tax funds in your IRA(s) into your employer's plan. Employer plans aren't allowed to accept the after-tax contributions, so those will remain in the IRA. At that point, your entire IRA balance will be after-tax, and under the current law, you can convert the entire amount to a Roth IRA without paying any additional taxes.

AJ
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