The Backdoor Roth IRA, Step by Step

Why the backdoor exists

A Roth IRA is one of the best accounts in the US tax code: money grows tax-free and comes out tax-free in retirement, with no required distributions during your lifetime. But Roth IRAs come with an income limit. Once your modified adjusted gross income (MAGI) climbs past a threshold — for 2026, roughly the mid-$150,000s for single filers and the mid-$240,000s for married-filing-jointly, phasing out over a band above that — you can't contribute directly at all.

Here's the quirk Congress left in place: while there's an income limit on contributing to a Roth, there is no income limit on converting a traditional IRA to a Roth. Anyone, at any income, can convert. The backdoor Roth simply chains these two facts together — you put money into a traditional IRA (which has no income limit for non-deductible contributions), then immediately convert it to Roth. The result is the same Roth dollars a lower earner could have contributed directly.

The two steps

Step 1 — Make a non-deductible traditional IRA contribution

Open (or use an existing) traditional IRA and contribute up to the annual limit — for 2026, $7,500 if you're under 50, with an additional catch-up for those 50 and older. Because your income is high, you almost certainly can't deduct this contribution, and that's fine — the whole strategy depends on it being non-deductible. You are contributing after-tax dollars that create "basis" in the IRA.

Step 2 — Convert to Roth

Shortly after the contribution settles, convert the entire traditional IRA balance to a Roth IRA. Most brokerages let you do this online in a couple of clicks. Because you already paid tax on the money (it was non-deductible) and it hasn't had time to grow, the conversion is essentially tax-free — you only owe tax on any earnings between the contribution and the conversion, which is typically a few dollars if you act quickly.

The pro-rata rule — the part that trips people up

This is the single most important thing to understand before you try a backdoor Roth. When you convert, the IRS does not let you cherry-pick only the after-tax dollars. Instead, it looks at all of your non-Roth IRAs combined — traditional, SEP, and SIMPLE IRAs — and treats every conversion as a proportional mix of pre-tax and after-tax money. This is the pro-rata rule, and it's calculated on Form 8606 using your total IRA balance on December 31 of the conversion year.

An example makes it concrete. Suppose you have a $93,000 pre-tax traditional IRA (from an old 401(k) rollover) and you make a fresh $7,000 non-deductible contribution, then convert $7,000 to Roth. Your total IRA balance is $100,000, of which only 7% is after-tax basis. So only 7% of your conversion is tax-free — the other 93% is taxable income.

Notice that even the "bad" cases aren't a disaster — you're not double-taxed, you're just accelerating tax you'd eventually owe on the pre-tax money, and the remaining basis stays with you. But most people doing a backdoor Roth want a clean, near-zero tax bill, which means clearing out pre-tax IRA balances first.

How to avoid the pro-rata problem

The goal is a $0 balance in all traditional, SEP, and SIMPLE IRAs as of December 31 in the year you convert. Common ways to get there:

• Roll pre-tax IRA money into your employer 401(k). Money inside a 401(k) is invisible to the pro-rata rule — only IRAs count. If your plan accepts incoming rollovers (many do), this is the classic fix.
• Convert the pre-tax IRA too — pay the tax now, then start doing clean backdoors going forward. This can make sense in a low-income year (see the Roth conversion ladder).
• Start clean. If you've never had a traditional IRA, you can do the backdoor from day one with zero complications.

Note that a spouse's IRAs are counted separately — the pro-rata rule is per person, not per household — so one spouse can do a clean backdoor even if the other holds a large pre-tax IRA.

Don't forget Form 8606

Every non-deductible contribution and every conversion must be reported on IRS Form 8606. This is how you tell the IRS that the money going in was already taxed, so it isn't taxed again on the way out. Skipping the form is the most common backdoor Roth mistake — do it several years in a row and you can lose track of your basis and end up paying tax twice. File an 8606 for each spouse who contributes, every year you do the backdoor.

Is the backdoor Roth worth it?

For a high earner with no pre-tax IRA balance, yes — it's a near-free way to add several thousand dollars of tax-free growth every year, and it stacks on top of your 401(k). Over decades those contributions compound into a meaningful tax-free bucket that also helps diversify your future tax exposure. You can see how account type changes your after-tax retirement income in the Roth conversion calculator, and how a stream of contributions grows with the compound growth calculator. If you're deciding where new dollars should go in the first place, our guide on 401(k) vs IRA vs Roth vs HSA lays out the priority order.

Frequently asked questions

Is the backdoor Roth IRA legal in 2026?

Yes. It remains a legal, widely used strategy, and Congress has referenced it approvingly. Proposals to close it have been floated but not enacted. As with any tax strategy, confirm the rules for the current year before you act.

How much can I put into a backdoor Roth?

The same as any IRA — for 2026, $7,500 if you're under 50, plus a catch-up amount if you're 50 or older. Married couples can each do their own, doubling the household total. These limits are indexed and change most years.

What is the pro-rata rule in one sentence?

When you convert, the taxable share equals the pre-tax portion of all your traditional, SEP, and SIMPLE IRAs combined — so any pre-tax IRA balance makes part of your backdoor conversion taxable.

Does my 401(k) balance count for pro-rata?

No. Only IRAs count. Money inside a 401(k) or other employer plan is ignored — which is exactly why rolling a pre-tax IRA into your 401(k) can clear the way for a clean backdoor Roth.

Is this the same as a mega backdoor Roth?

No. The mega backdoor Roth uses after-tax contributions inside a 401(k) and can move much larger sums, but it requires a plan that specifically allows after-tax contributions and in-plan conversions. The regular backdoor Roth described here uses IRAs and is available to almost anyone.

Put a number on it

• Roth Conversion Calculator — estimate the tax on converting pre-tax IRA money.
• Compound Growth Calculator — see what yearly backdoor contributions grow into.
• The Roth Conversion Ladder — the bigger strategy for moving pre-tax money to Roth.
• 401(k) vs IRA vs Roth vs HSA — where each new dollar should go first.