Backdoor Roth IRA: How It Works

Roth IRA contributions are phased out at higher income levels. The backdoor Roth strategy lets you make a non-deductible contribution to a Traditional IRA and then convert that amount to a Roth IRA.

In 2026, the standard IRA contribution limit is $7,500. When done correctly, the strategy can still give high earners Roth IRA exposure, but only if the conversion tax math works in your favor.

If you have other pre-tax IRA balances (Traditional, SEP, SIMPLE), the IRS treats all IRAs as one when taxing the conversion. You cannot convert only the non-deductible portion; a portion of the conversion is taxed based on the ratio of pre-tax to total IRA assets.

That often means paying more tax than expected. For example, if you already have $60,000 of pre-tax IRA money and make a new $7,500 non-deductible contribution, only about 11% of a $7,500 conversion would be tax-free. To avoid that problem, some people roll pre-tax IRA balances into a 401(k) before doing the backdoor conversion, leaving only the new non-deductible contribution in the IRA.

The typical backdoor flow: contribute to a Traditional IRA (non-deductible), then convert to Roth. Do both in the same year or split across years depending on your plan.

Some providers offer a streamlined process. Document the contribution and conversion for tax purposes; you will report basis and conversion details on Form 8606.

The backdoor Roth is most useful when you have maxed out 401(k) and HSA, want additional Roth exposure, and have no pre-tax IRA balances (or can move them to a 401(k)).

If you have significant pre-tax IRA money, the pro-rata tax may outweigh the benefit. It is usually worth pausing before you proceed if you have SEP or SIMPLE IRA balances, uncertain tax reporting, or a recent rollover that changed your IRA mix.

Backdoor Roth conversions have been discussed in tax reform proposals. The strategy is valid under current law, but future legislation could limit or eliminate it.

If you are eligible and the math works, executing sooner rather than later may reduce regulatory risk.