How to Convert a Traditional IRA to a Roth IRA

What happens when you convert a traditional IRA to a Roth

A Roth conversion means moving money from a traditional IRA into a Roth IRA. You pay income tax on the amount you convert in that tax year, but the money then grows tax-free in the Roth account and you owe no tax when you withdraw it later. The conversion itself is a one-time transaction you initiate with your IRA provider — it is not automatic and does not happen unless you request it.

The conversion is permanent. Once money moves to the Roth, it stays there. You cannot undo it after the tax year ends, though the IRS does allow a limited window (until October 15 of the following year) to reverse a conversion if you file a timely amended return — a process called a recharacterization, which is rare and requires tax help to execute correctly.

Key Takeaways

You initiate a conversion by contacting your IRA provider (your bank, brokerage, or investment firm) and requesting a direct transfer from your traditional IRA to your Roth IRA.
You must pay income tax on the full amount converted in the year you convert it, calculated at your ordinary income tax rate.
There is no income limit to do a conversion, even if you earn too much to contribute directly to a Roth.
The conversion counts as taxable income for that year, which may affect your tax bracket, Medicare premiums, or other tax-based benefits.
You have until October 15 of the year after conversion to file an amended return and reverse the conversion if the market drops significantly.

How to request a conversion from your IRA provider

Contact the financial institution that holds your traditional IRA — this is usually a bank, brokerage firm, or investment company. Call their customer service line or log into your online account and look for options labeled "transfer," "rollover," or "conversion." Most providers have a form you fill out that specifies the amount you want to move and the destination Roth IRA account.

You can convert the entire balance or only part of it. If you convert part of it, you specify the dollar amount on the form. The provider will ask whether you want them to transfer the money directly (trustee-to-trustee transfer) or send you a check. A direct transfer is simpler and avoids the 60-day rule that applies to rollovers — if you take a check and miss the deadline to deposit it in the Roth, the IRS treats it as a withdrawal and you owe taxes plus a 10 percent penalty if you are under 59½.

The transfer usually completes within one to two weeks. You will receive confirmation from both the traditional IRA provider and the Roth IRA provider showing the amount moved and the date. Keep these confirmations for your tax records.

Understanding the tax bill you owe

When you convert, you owe federal income tax on the amount converted. The tax is calculated at your ordinary income tax rate for that year — the same rate you pay on wages or other regular income. If you convert $50,000 and you are in the 24 percent tax bracket, you owe approximately $12,000 in federal tax (state tax may apply as well, depending on where you live).

The tax is due when you file your tax return the following year. You do not pay it upfront to the IRA provider. However, you can pay the tax from your own funds or have the IRA provider withhold it from the conversion amount itself. If you have the provider withhold tax, the amount withheld reduces what actually moves into the Roth account. For example, if you convert $50,000 and request 24 percent withholding, only $38,000 goes into the Roth and $12,000 goes to the IRS.

The conversion is reported on Form 8606, which you file with your tax return. Your IRA provider will send you a Form 1099-R showing the conversion amount, and you use that to complete Form 8606.

The pro-rata rule and why it matters if you have multiple IRAs

If you have both a traditional IRA and a SEP IRA or SIMPLE IRA, the IRS applies the pro-rata rule to conversions. This rule treats all your IRAs as one account for tax purposes. If 30 percent of your total IRA balance is pre-tax money and 70 percent is after-tax money (contributions you already paid tax on), then 30 percent of any conversion is taxable and 70 percent is not.

This rule can create a large unexpected tax bill. For example, if you have a $100,000 traditional IRA and a $10,000 SEP IRA, and you want to convert only the $10,000 SEP IRA, the pro-rata rule treats the conversion as 91 percent of a combined $110,000 pool. You owe tax on roughly $9,100 of the $10,000 conversion, not zero.

The pro-rata rule applies in the year you convert. One strategy some people use is to roll pre-tax IRA money into a workplace 401(k) plan (if their employer allows it) before converting, which removes that pre-tax money from the pro-rata calculation. This is complex and requires planning with a tax professional.

Income limits do not apply to conversions

Unlike direct contributions to a Roth IRA, which have income limits that phase out your ability to contribute, conversions have no income limit. You can earn $500,000 per year and still convert a traditional IRA to a Roth. This is why conversions are often used by high-income earners who cannot contribute directly to a Roth because they exceed the income threshold.

However, the conversion itself counts as taxable income for that year. If you convert a large amount, it may push you into a higher tax bracket, which increases the tax you owe on the conversion and potentially on your other income as well. It can also trigger the net investment income tax (an extra 3.8 percent tax on certain investment income) or increase your Medicare premiums if you are near retirement age.

Timing considerations and the backdoor Roth strategy

You can do a conversion at any time during the year. Some people convert in December, others spread conversions across multiple years to manage their tax bill. There is no limit on how many conversions you can do or how much you can convert in a single year.

A common strategy called the backdoor Roth uses a conversion to work around income limits. You contribute after-tax money to a traditional IRA (which has no income limit), then immediately convert it to a Roth. Since you already paid tax on the contribution, you owe little or no additional tax on the conversion. This requires careful timing and record-keeping, and the pro-rata rule can complicate it if you have other pre-tax IRA balances.

If you are considering a backdoor Roth or a large conversion, consult a tax professional before you act. The tax consequences vary based on your specific situation, and a mistake can be expensive.

What to do if the market drops after you convert

If the value of your investments falls sharply after you convert, you can reverse the conversion by filing an amended tax return before October 15 of the following year. This is called a recharacterization. You owe no additional tax if you reverse before the deadline, and you can then reconvert later if you wish.

For example, if you convert $50,000 of stock and it drops to $35,000 within weeks, you can recharacterize the conversion, undo the $50,000 tax bill, and reconvert the $35,000 later. This saves you tax on the $15,000 loss. However, recharacterization requires filing an amended return and is a technical process — most people work with a tax professional to handle it.

Frequently Asked Questions

Do I have to convert my entire traditional IRA at once?

No. You can convert part of your balance and leave the rest in the traditional IRA. You specify the dollar amount on the conversion form. Some people convert in stages over multiple years to spread out the tax bill.

What if my traditional IRA has both pre-tax and after-tax money?

The pro-rata rule applies. The IRS treats all your IRAs as one pool and taxes the conversion based on the percentage of pre-tax money in that pool, not just the account you are converting from. This can result in a larger tax bill than you expect.

Can I convert a 401(k) to a Roth?

Yes, but only if your 401(k) plan allows it and you are no longer employed by that employer (or your plan permits in-service conversions). Contact your plan administrator to ask whether conversions are permitted. The same tax rules apply as with IRA conversions.

What happens if I do not have enough money to pay the tax bill?

You still owe the tax when you file your return. You can pay it from other funds, set up a payment plan with the IRS, or have the IRA provider withhold the tax from the conversion amount itself. If you cannot pay and miss the deadline, the IRS charges interest and penalties.

Can I reverse a conversion after October 15?

No. The deadline to recharacterize (reverse) a conversion is October 15 of the year following the conversion. After that date, the conversion is permanent and you cannot undo it.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.