What high earners need to know about the Backdoor Roth IRA in 2022

Those of us who have been funding backdoor Roth IRAs should be aware that legislation in the Build Back Better Framework that started in 2021 has wording to eliminate the ability to convert after-tax IRA funds into Roth. As of January 2022 the final bill is still being negotiated upon. What this means is that when the bill becomes signed into law–some variant of the entire framework will eventually be agreed upon–we’ll likely see one of three scenarios:

  1. There will be no mention of eliminating post-tax Roth conversions.
  2. Post-tax Roth conversions will be eliminated and rules backdated to 1/1/2022.
  3. Post-tax Roth conversions will be eliminated, which will take effect the following year.

I guess that they could also make the effective date the exact date the bill is signed, but that would likely create a mess that no one would want to deal with when tax season rolls around.

If option #2 ends up becoming law, the tax system would likely have a mechanism to undo a post-tax Roth conversion in 2022. What does this mean? I’m going ahead to fund my backdoor Roth IRA in 2022!

Here are the following articles that will help you get started:

Why a Roth IRA should be considered in every physician household

How to fund your backdoor Roth IRA via E-Trade – 2021 Edition

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