How to Convert a Non-Deductible IRA to a Roth IRA

To convert a non-deductible IRA to a Roth IRA, you contribute after-tax dollars to a traditional IRA, file Form 8606 to record that those dollars are basis, ask your custodian to transfer the funds directly into a Roth IRA, and then report the conversion on Part II of Form 8606 with your tax return. The mechanics are simple. What trips people up is the pro-rata rule, which pulls every other traditional, SEP, and SIMPLE IRA you own into the tax calculation. Get that piece wrong and a conversion you expected to be tax-free becomes mostly taxable.

There is no income limit on conversions, which is why this route exists for high earners who cannot contribute to a Roth directly.¹ For 2026, the combined IRA contribution limit is $7,500, or $8,600 if you are 50 or older, and you have until April 15, 2027 to contribute for the 2026 tax year.²

Step 1: Make the Non-Deductible Contribution and Record Your Basis

Contribute to a traditional IRA and choose not to deduct it on your tax return. Because that money has already been taxed, it becomes your “basis” in the account. Basis is the running total of dollars you contributed but never deducted, and it is the piece you should not be taxed on again at conversion.

You track basis by filing IRS Form 8606 with your tax return every year you make a non-deductible contribution.³ The form records the current-year contribution and carries forward cumulative basis from prior years. This is the only record the IRS has that your contributions were after-tax. Skip it, and the IRS treats the money as pre-tax when you convert.

The direct penalty for missing Form 8606 is modest: $50 per missed form, with a separate $100 penalty if you overstate non-deductible contributions.⁴ The real cost is losing the basis record, which lets the IRS tax the same dollars twice. If you missed the form in past years, file late versions to reconstruct basis before you convert.

Step 2: Clear the Pro-Rata Problem Before You Convert

This is where most attempts go sideways. Federal law requires the IRS to treat all of your traditional, SEP, and SIMPLE IRAs as one combined pool when calculating tax on any conversion.⁵ Different custodians, different account names, mental earmarks — none of it matters. The IRS sees one balance.

The math: divide your total pre-tax IRA money by the total balance of all your traditional-type IRAs as of December 31 of the conversion year. That fraction is the taxable percentage of every dollar you convert.

Say you have $100,000 in a rollover IRA from an old employer and you make a fresh $7,500 non-deductible contribution to a separate traditional IRA. Total balance: $107,500. Basis: $7,500. Pre-tax share: $100,000 ÷ $107,500, or about 93%. Convert the $7,500 and roughly $6,975 of it is taxable. You cannot cherry-pick the after-tax dollars.

Rolling Pre-Tax Money Into an Employer Plan

The clean backdoor conversion only works when your total pre-tax IRA balance is at or near zero. If you have pre-tax money from old rollovers or deductible contributions, the standard fix is to roll it into a current employer’s 401(k) or similar qualified plan.⁶ This reverse rollover pulls the pre-tax money out of the aggregation calculation. Once only your non-deductible basis is left in the traditional IRA, the conversion is tax-free.

Not every employer plan accepts incoming rollovers, so check your plan documents first. If yours does not, or you are self-employed without a solo 401(k), the strategy produces a tax bill unless you accept paying the pro-rata share as you gradually convert everything.

What Counts on December 31

The pro-rata denominator is your combined IRA balance on December 31 of the conversion year, plus any outstanding rollovers.⁷ Converting in January of the following year does not help if pre-tax IRA money is still sitting there on December 31. The year-end snapshot is what matters, so any reverse rollover has to be completed by then.

Step 3: Execute the Conversion

Once the non-deductible contribution is in the traditional IRA, contact your custodian and ask them to convert those funds to a Roth IRA. Most custodians handle this as a direct transfer, moving the money electronically without it ever landing in your bank account.⁶ A 60-day rollover, where you take a check and redeposit it, is technically possible, but the direct transfer removes the risk of missing that deadline and turning the whole thing into a taxable distribution.

Timing matters. Convert as soon as possible after the contribution. Any investment gains that accrue while the money sits in the traditional IRA are pre-tax earnings and become taxable at conversion. Contribute Monday and convert Wednesday and the two-day growth is nothing. Wait six months and let the account earn $400 and that $400 is taxable income for the year.

Do Not Let the Custodian Withhold Tax

If your custodian withholds federal income tax from the conversion, the withheld amount counts as a distribution to you, not as money that reached the Roth. You would have to replace those dollars from other funds within 60 days or the shortfall becomes a taxable distribution. Tell the custodian to convert the full amount with no withholding, then handle the tax bill separately.

Conversions Are Permanent

Before 2018, you could undo a Roth conversion through recharacterization if the tax bill came in higher than expected. The Tax Cuts and Jobs Act eliminated that option. Every conversion is now final. Run the tax math before you initiate the transfer, not after.

Step 4: Report the Conversion Correctly

Your IRA custodian sends Form 1099-R for the year of the conversion, showing the total amount converted in Box 1 and a distribution code in Box 7.⁸ You use that to complete Part II of Form 8606, which calculates how much of the conversion is taxable.⁷

The lines that matter on Form 8606 in a conversion year:

Line 6: total value of all your traditional, SEP, and SIMPLE IRAs as of December 31 of the conversion year. This is the pro-rata denominator.
Line 8: the net amount you converted to a Roth during the year.

The form walks through the pro-rata fraction and produces the taxable figure, which flows to Line 4b of Form 1040. The full conversion amount, including the non-taxable basis portion, goes on Line 4a.⁹ The dual reporting shows the IRS that part of the converted money was already taxed.

Skip Form 8606 in the conversion year and the IRS sees only the 1099-R and treats the entire amount as taxable. That is the single most expensive filing mistake in this process.

If You Are 73 or Older, Take Your RMD First

At 73 and up, you must take your required minimum distribution for the year before converting any additional IRA funds to a Roth.¹⁰ The IRS treats the first dollars leaving your traditional IRA each year as satisfying the RMD, and an RMD cannot be rolled over or converted. Accidentally convert the RMD amount and it becomes an excess Roth contribution subject to a 6% penalty for every year it stays in the account.¹¹

The order is: withdraw the full RMD, then initiate the conversion with whatever else you want to move. One benefit at this age is that Roth IRAs are not subject to RMDs during the original owner’s lifetime, so anything you convert escapes future mandatory withdrawals.¹⁰

The Five-Year Clock on Converted Funds

Money comes out of a Roth in a set order: direct contributions first, then conversions (oldest first), then earnings. Each conversion starts its own five-year clock on January 1 of the year you convert. Withdraw a converted amount before that clock finishes and you owe a 10% early withdrawal penalty on the taxable portion, unless you are 59½ or older.¹² A December 2026 conversion clears on January 1, 2031.

The critical detail for a clean non-deductible conversion: the penalty attaches only to the taxable portion. If you had zero pre-tax IRA balance and the entire conversion was basis, there is nothing for the penalty to touch. The five-year rule mainly bites people converting large pre-tax balances.

A separate five-year rule governs earnings. For earnings to come out tax-free and penalty-free, you must be at least 59½ and your first Roth account must have been open at least five tax years, measured from your first-ever Roth contribution or conversion.

1
Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
2
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
3
Internal Revenue Service. About Form 8606, Nondeductible IRAs
4
Internal Revenue Service. 2025 Instructions for Form 8606 – Nondeductible IRAs
5
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Internal Revenue Service. Instructions for Form 8606 (2025)
8
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
9
Internal Revenue Service. Form 8606 – Nondeductible IRAs
10
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
11
Internal Revenue Service. Roth Conversions – Potential Pitfalls Regarding Required Minimum Distributions
12
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions