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1. This is an actual conversion of your traditional ira to a roth ira. Since your made a non-deductible (after-tax) contribution to your traditional ira, you do not need to pay taxes on this conversion (unless you had growth - in which you need to pay taxes on any growth)
2. This is basically voiding your original traditional ira and creating a roth ira from scratch.
Most people do #1 as part of a backdoor roth ira. If the reason you contributed after-tax funds to your traditional ira is because you don't qualify for a roth ira, you want to do #1 (conversion).
If you do qualify for a roth ira, #2 will make your tax filing slightly simpler.
1. This is an actual conversion of your traditional ira to a roth ira. Since your made a non-deductible (after-tax) contribution to your traditional ira, you do not need to pay taxes on this conversion (unless you had growth - in which you need to pay taxes on any growth)
2. This is basically voiding your original traditional ira and creating a roth ira from scratch.
Most people do #1 as part of a backdoor roth ira. If the reason you contributed after-tax funds to your traditional ira is because you don't qualify for a roth ira, you want to do #1 (conversion).
If you do qualify for a roth ira, #2 will make your tax filing slightly simpler.
Thank you
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