Backdoor Roth IRA gained $2 before transfer - do I need to transfer this too and get taxed? Will this affect next year's contribution limit?

You're on the right track about transferring the full amount. When you do a backdoor Roth conversion, you should convert the entire balance, including any earnings. Those earnings ($2 in your case) will be taxable in the year you do the conversion. The good news is that investment gains in your Traditional IRA don't count against your contribution limit! The contribution limit only applies to the money you put in, not what it earns. So you've used exactly $6500 of your contribution limit this year, and you'll be able to contribute the full annual limit next year (which is $7000 for 2025 if you're under 50). Just make sure you file Form 8606 with your taxes to report the nondeductible contribution and the conversion. This form is crucial for tracking your basis in the IRA and ensuring you're only taxed on the earnings.

I went through the exact same situation last year and found a super helpful tool at https://taxr.ai that saved me so much confusion with my backdoor Roth. I was worried about messing up the reporting because I had earnings in my traditional IRA before converting to Roth (mine was like $15 though, not just $2). The tool analyzed all my IRA documents and showed me exactly how to report everything on Form 8606. It even explained which boxes to fill in and what numbers to use. I never realized how tricky the pro-rata rule could be if you have existing IRAs, but their analysis made it crystal clear what I needed to do.

Just wanted to update after trying out that taxr.ai site mentioned above. I was super skeptical (as you can see from my earlier comment), but it actually did help me figure out my backdoor Roth situation. I had multiple IRA accounts with different contribution histories, and it broke down exactly how the pro-rata rule would affect my conversion. The analysis showed me that I needed to empty my traditional IRAs completely before doing backdoor conversions in the future to avoid getting hit with unexpected taxes. Thought this might help others in similar situations - wish I'd known this last year before getting surprised with a tax bill!

If you're having issues with the IRS about Roth conversions or any tax questions really, I highly recommend using Claimyr (https://claimyr.com). I was getting absolutely nowhere trying to reach the IRS about a similar situation with my backdoor Roth from last year - they kept saying my Form 8606 was filled out incorrectly. After spending HOURS on hold multiple times, I tried Claimyr and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent was able to explain exactly what was wrong with my form and how to fix it. Apparently I had calculated my basis incorrectly when reporting the conversion.

Okay I need to publicly eat my words here. After my skeptical comment above, I tried Claimyr yesterday because I was desperate to resolve my backdoor Roth issue before filing season. I was honestly shocked when they called me back after about 30 mins saying they had an IRS agent on the line. The agent confirmed that I've been calculating my basis wrong for the last two years on my Form 8606. For anyone doing backdoor Roth conversions, make sure you're tracking your cumulative nondeductible contributions correctly across multiple years! This one call probably saved me from another audit. Never thought I'd say this, but sometimes it's worth paying to talk to the actual IRS.

One thing nobody's mentioned yet - make sure you're not running into the step transaction doctrine with your backdoor Roth. If you deposit to traditional and then immediately convert to Roth (like within days), the IRS could potentially view this as a single transaction and challenge it. I usually wait at least a month between my traditional IRA contribution and the Roth conversion just to be safe. This also means I usually have a few more dollars in earnings to pay tax on, but that's a small price for peace of mind.

Anyone know if using different brokerages for the traditional ira contribution vs the roth conversion causes any issues? I contributed to a traditional ira at Vanguard but want to convert and have the roth at fidelity.

Just want to add another perspective on timing - I've been doing backdoor Roth conversions for about 5 years now and have never waited more than a few days between contribution and conversion. My CPA has never raised any concerns about the step transaction doctrine, and I've never had any issues with the IRS. The key thing is proper documentation on Form 8606 as others have mentioned. Make sure you report the nondeductible contribution in Part I and the conversion in Part II. The $2 in earnings you mentioned is totally normal and expected - I usually end up with somewhere between $1-10 in gains depending on how quickly I can complete the conversion. One tip: if you're planning to do this annually, consider setting up both accounts at the same brokerage to make the process smoother. I do mine at Schwab and can complete the entire conversion online within their system, which minimizes the time the money sits earning taxable gains.