After-Tax 401(k) to Roth IRA: What Gets Taxed?

Employer matching and profit-sharing contributions, pre-tax elective deferrals, designated Roth deferrals, voluntary after-tax employee contributions, and their earnings may appear as separate sources. The plan’s records must identify the applicable sources; a reader should not infer basis from a label alone. [6] [9]

After-tax non-Roth employee contributions generally are voluntary employee contributions made with compensation already included in income. They are different from designated Roth salary deferrals even though both use after-tax pay. [6] [9]

The label does not automatically include employer matching or profit-sharing contributions, pre-tax elective deferrals, designated Roth contributions, or earnings on the after-tax contribution source. Those amounts may have different tax character. Accurate plan-source statements and administrator records are therefore central to any rollover calculation.

The $24,500 elective-deferral limit and the $72,000 annual-additions limit are different limits. Annual additions generally include applicable elective deferrals, employer matching and nonelective contributions, employee after-tax contributions, and other included additions. Catch-up contributions generally receive separate treatment. The annual-additions ceiling is also limited to 100% of applicable compensation, and a plan may impose a lower limit or decline to offer after-tax contributions. [3] [4] [10]

The illustrated $54,500 is below the $72,000 federal dollar limit, but that does not mean the remaining $17,500 can automatically be contributed. Compensation, plan design, testing, related employers, other additions, and participant classification can reduce or eliminate available room. [3] [10]

Generally, not simply by selecting only the after-tax source from a mixed plan distribution. When the applicable plan account contains both pre-tax and after-tax amounts, a partial distribution generally contains a proportional share of both. [1] [2]

IRS Notice 2014-54 treats disbursements scheduled at the same time as a single distribution for allocating pre-tax and after-tax amounts, even when the participant directs the money to multiple destinations. The recipient generally can direct the distributed pre-tax portion to one eligible destination and the distributed after-tax portion to another. Allocation instructions must be coordinated with the plan before the direct rollovers. [1] [2]

The purpose is not to make pre-tax money disappear. The $80,000 remains in a pre-tax account, while valid contribution basis enters Roth. This differs fundamentally from sending the entire $100,000 to a Roth IRA. [1] [2]

The existence of $20,000 of basis does not change the tax character of the remaining $80,000. A direct rollover can simplify execution and avoid mandatory participant-payment withholding, but it does not turn previously untaxed money into basis. [1] [5]

For the broader source-by-source comparison, read Can You Convert a 401(k) to a Roth IRA Tax-Free? 4 Cases Explained.

Generally, no. After-tax employee contributions create basis, but investment earnings attributable to those contributions are generally pre-tax amounts. [1]

When the plan and rollover rules permit, a coordinated distribution may send the $30,000 of basis to a Roth IRA and the $5,000 of pre-tax earnings to a Traditional IRA. If the full $35,000 instead enters Roth, the $5,000 generally is taxable. The earnings do not become Roth merely because they grew beside after-tax contributions. [1] [2]

The longer after-tax contributions remain in a non-Roth source, the more pre-tax earnings may accumulate. A plan that permits in-service distributions, in-plan Roth conversions, or automatic Roth conversion of after-tax contributions may allow the tax character to change sooner. That can reduce the amount of new pre-tax earnings accumulated before Roth treatment begins.

This is a conceptual explanation, not a recommendation about frequency. Not every plan supports the contribution source, an automatic feature, frequent conversions, or an in-service distribution. Fees, blackout periods, payroll timing, plan testing, and administrative procedures may also matter. [6] [7] [8]

“Mega backdoor Roth” is an informal industry term, not the name of a special IRS account. It generally describes after-tax non-Roth contributions to an employer plan followed by a permitted rollover or conversion into a Roth account.

• The plan must accept voluntary after-tax employee contributions.
• The participant must have room under applicable contribution and compensation limits.
• The plan must permit an in-plan Roth conversion or an eligible distribution to a Roth IRA.
• Plan rules determine timing, frequency, destinations, and whether an in-service option exists.
• Contribution basis and related earnings must remain distinguishable in the records.

The two processes use different basis and allocation systems. For the IRA calculation, review Roth Conversion Basis, Form 8606 and the Pro-Rata Rule.

Both use after-tax compensation, but only designated Roth contributions enter the plan’s separate statutory Roth account. An after-tax non-Roth source is basis plus generally pre-tax earnings until a permitted Roth transaction occurs. [6] [7] [9]

A mixed partial distribution generally must include its proportional share of pre-tax and after-tax amounts. Notice 2014-54 does not let a participant label a $50,000 partial distribution from an 80% pre-tax plan as entirely after-tax. [1] [2]

The destinations may separate the two portions that were distributed. The participant did not extract only the after-tax dollars; the $50,000 distribution still carried the plan’s assumed 80% / 20% character. [1] [2]

Federal rollover rules do not force an employer plan to offer every contribution, distribution, or Roth-conversion feature. A plan may accept after-tax contributions but restrict distributions, permit an in-plan Roth conversion, allow an in-service withdrawal only at specified ages or events, restrict frequency, or omit after-tax contributions entirely. [6] [8]

Plan eligibility should be checked before estimating the tax result. Useful sources include the Summary Plan Description, plan administrator, recordkeeper, and benefits department. An online portal may not display every available option or all source-level records.

No. A 401(k), 403(b), or governmental 457(b) plan with a designated Roth feature may permit an in-plan Roth rollover. The plan must allow the feature and can specify eligible amounts and frequency. [6] [7]

• A direct in-plan Roth rollover generally does not require tax withholding.
• The taxable amount is generally fair market value minus basis and enters gross income.
• Valid basis can reduce the taxable portion.
• The assets may remain subject to existing plan distribution restrictions.
• The transaction is reportable and cannot be treated as universally preferable to a Roth IRA rollover.

The practical comparison may include investment choices, plan fees, withdrawal restrictions, creditor treatment, consolidation, custodian service, and future distribution needs. This article does not choose between destinations. [6] [7]

A direct rollover generally simplifies the movement and avoids mandatory 20% withholding that can apply to certain eligible taxable distributions paid to the participant. A participant-paid distribution can introduce a 60-day deadline, withholding on taxable amounts, and a need to replace withheld dollars to roll over the full gross eligible amount. [5]

Those penalty, withholding, and later-withdrawal rules are covered in Can You Move a 401(k) to a Roth IRA Without Penalty? This after-tax guide does not repeat that full analysis.

Each illustration assumes an eligible distribution, accurate contribution-source records, timely and coordinated execution, and no additional transaction facts. It is not a transaction recommendation or tax-return calculation.

1. Assuming after-tax means Roth.
2. Assuming earnings on after-tax contributions were already taxed.
3. Looking only at employee contributions and ignoring earnings.
4. Assuming an entire 401(k) can move to Roth without income because some basis exists.
5. Trying to distribute only after-tax dollars from a mixed account.
6. Missing the proportional character of a partial distribution.
7. Failing to coordinate multiple destinations with the plan.
8. Sending pre-tax money to Roth unintentionally.
9. Confusing a Roth 401(k) with an after-tax non-Roth source.
10. Assuming every employer plan accepts after-tax contributions.
11. Assuming every plan allows in-service withdrawals.
12. Assuming every plan allows automatic Roth conversions.
13. Ignoring the 2026 annual-additions limit.
14. Treating $72,000 as a universal employee contribution limit.
15. Ignoring employer contributions when estimating available annual-addition room.
16. Using “mega backdoor Roth” as though it were a separate IRS account.
17. Confusing employer-plan allocation with the Traditional IRA Form 8606 pro-rata rule.
18. Failing to retain contribution-source and rollover records.

1. Does the plan permit voluntary after-tax non-Roth employee contributions?
2. How are those contributions labeled?
3. Does the plan separately track after-tax contribution basis and earnings?
4. What is the current after-tax basis?
5. What pre-tax earnings are associated with it?
6. Does the plan permit in-service distributions of those amounts?
7. At what age or event may a distribution occur?
8. Does the plan permit in-plan Roth rollovers?
9. Can the plan automatically convert new after-tax contributions to Roth?
10. How frequently can conversions occur?
11. Can the plan send one distribution to multiple destinations?
12. Can pre-tax amounts go directly to a Traditional IRA?
13. Can after-tax amounts go directly to a Roth IRA?
14. Which tax and transaction forms will be issued?
15. Are there transaction fees?
16. Are employer contributions or other sources included?
17. What amount counts toward the 2026 annual-additions limit?
18. Does the plan impose a contribution limit below the federal maximum?

A plan administrator may answer these questions differently for different contribution sources or participant circumstances. The checklist organizes a review; it does not imply that every feature must be offered.

• After-tax non-Roth 401(k) contributions have already been taxed.
• Earnings on those contributions are generally pre-tax.
• Mixed plan distributions generally contain both pre-tax and after-tax amounts.
• Applicable IRS guidance can allow those distributed amounts to be sent to different destinations.
• After-tax basis may go to Roth while pre-tax money remains tax-deferred.
• Whether the strategy is available depends heavily on the employer plan.