Do I pay tax on IRA Conversion?

Yes, in most cases you pay income tax on the amount you convert from a traditional IRA or pre‑tax 401(k) to a Roth IRA. That converted amount is treated as ordinary income in the year of conversion, just like wages or business income. If your IRA contains both pre‑tax and after‑tax contributions, only the pre‑tax portion is taxed, but the IRS usually requires you to use a pro‑rata formula across all your IRAs, not just the one you converted. A Roth conversion itself is not subject to the 10% early‑withdrawal penalty if the funds go directly into the Roth account. Many people aim to pay the tax from separate savings so that the entire converted balance can remain in the Roth to grow tax‑free.

Learn more about IRA conversion appraisals.