Backdoor Roth IRA: How It Works, Step by Step

A backdoor Roth IRA is a way to get money into a Roth when your income is too high to contribute directly. You make a non-deductible contribution to a traditional IRA, which has no income limit, then convert it to a Roth IRA. If you have no other pre-tax IRA money, the conversion is almost tax-free. If you do, the pro-rata rule makes part of it taxable, and that’s the step most people get wrong.

Backdoor Roth at a glance

Do you need a backdoor at all?

Check first. If your MAGI is below $153,000 single or $242,000 joint, you can contribute to a Roth directly. Between those and $168,000 or $252,000, you can contribute a reduced amount directly and could use the backdoor for the rest of the limit. The Roth IRA calculator works out your direct limit for 2026, with MAGI worked out from your AGI if you need it. Our guide to calculating MAGI explains which add-backs the Roth uses.

How to do a backdoor Roth IRA, step by step

1. Check your other IRA balances

Add up everything you have in traditional, SEP and SIMPLE IRAs that was never taxed: deductible contributions, rollovers from old 401(k)s, and their growth. If the answer is zero, skip to step 3. If it isn’t, read the pro-rata section below first. Money in a 401(k), 403(b) or an inherited IRA doesn’t count.

2. Clear pre-tax IRA money if you can

Many workplace plans accept roll-ins. Moving pre-tax IRA money into your 401(k) takes it out of the pro-rata sum. It has to be done by 31 December of the year you convert, because that’s the date the IRS measures.

3. Make a non-deductible traditional IRA contribution

Contribute up to $7,500 ($8,600 at 50 or older) to a traditional IRA and don’t deduct it. Many people leave it in cash or a money market fund until the conversion so it earns little in between. You have until the filing deadline, 15 April 2027, to contribute for 2026.

4. Convert it to a Roth IRA

Ask your provider to convert the traditional IRA to your Roth IRA. There’s no income limit and no limit on how much you can convert. Any earnings since you contributed are taxable when you convert, so a short gap keeps that small.

5. File Form 8606

Form 8606 is how the IRS knows your contribution was already taxed. Part I records the non-deductible contribution (your “basis”); Part II records the conversion and works out how much of it is taxable. Your provider will send a Form 1099-R for the conversion. Skip Form 8606 and you can be taxed twice on the same money; there’s also a $50 penalty for not filing it when you should.

6. Repeat each year

The backdoor isn’t a one-off. Each year’s contribution and conversion is its own pair of steps and its own Form 8606.

The pro-rata rule, with numbers

The IRS treats all your traditional, SEP and SIMPLE IRAs as one pot. You can’t convert only the after-tax dollars. Each conversion is part after-tax and part pre-tax, in the same proportion as the whole pot, measured on 31 December.

Tax-free share of the conversion = your basis ÷ (all traditional, SEP and SIMPLE IRA balances on 31 December + the amount converted during the year)

Example 1: no other IRA money

You contribute $7,500 non-deductible and convert it a week later, when it’s still worth $7,500. Your other IRAs are empty on 31 December. Basis $7,500 ÷ ($0 + $7,500) = 100% tax-free. You owe nothing on the conversion. If it had earned $20 in the week, that $20 would be taxable.

Example 2: an old rollover IRA

Same $7,500 contribution and conversion, but you also have a rollover IRA from an old job worth $67,500 on 31 December.

Nine-tenths of what you converted is taxed as income, even though the money you put in was after-tax. The basis isn’t lost; it stays with the remaining traditional IRA and comes out tax-free later. But the clean conversion you wanted didn’t happen. Rolling the $67,500 into a 401(k) before 31 December would have made it 100% tax-free.

Rules and risks to know

• The five-year rule for conversions. Each conversion has its own five-year clock. If you’re under 59.5 and withdraw a converted amount that was taxed at conversion within five years, the 10% penalty can apply to it. Converted basis that wasn’t taxed isn’t hit by the penalty.
• Your spouse is separate. The pro-rata rule looks at each person’s own IRAs. A married couple can each do a backdoor, each with their own Form 8606.
• Recharacterising is gone. Since 2018, a conversion can’t be undone. Check the numbers before you convert.
• Is it allowed? The backdoor uses two steps that are each allowed on their own, and it’s widely used. The IRS hasn’t published a rule against it. If your situation is complicated, a tax professional can check it before you start.

What about the “mega backdoor”?

Some 401(k) plans let you make after-tax contributions beyond the normal employee limit, then convert them to Roth inside the plan or roll them to a Roth IRA. It’s a separate strategy that depends entirely on your plan’s rules. Ask your plan administrator whether it allows after-tax contributions and in-plan conversions or in-service withdrawals.

Common mistakes

• Forgetting the rollover IRA. An old 401(k) rolled into an IRA years ago is the usual reason a backdoor turns out taxable.
• Clearing the IRA after 31 December. The pro-rata rule uses the balance at the end of the conversion year.
• Not filing Form 8606. Without it there’s no record your contribution was already taxed.
• Deducting the contribution. A deducted contribution is pre-tax money, and converting it is fully taxable.
• Contributing directly to a Roth over the limit. That’s an excess contribution, taxed 6% a year until it’s removed. The backdoor is the fix, not the alternative.

Frequently asked questions

Is a backdoor Roth IRA legal?

Each step is allowed under the tax rules: anyone with earned income can make a non-deductible traditional IRA contribution, and anyone can convert to a Roth. The strategy is widely used, and the IRS hasn’t published a rule against it.

Do I pay tax on a backdoor Roth conversion?

Only on earnings between contribution and conversion, if you have no other pre-tax money in traditional, SEP or SIMPLE IRAs. If you do, the pro-rata rule makes part of the conversion taxable.

How long should I wait between the contribution and the conversion?

There’s no rule. Many people convert within days so there are almost no earnings to tax. Some prefer to wait until the contribution has posted and appears on a statement.

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

No. Only traditional, SEP and SIMPLE IRAs count. That’s why rolling pre-tax IRA money into a 401(k) is the usual way to clear the way for a backdoor.

Sources

• IRS, Form 8606 and its instructions: non-deductible contributions, basis and the taxable part of conversions; the $50 penalty for not filing.
• IRS, Publication 590-A: contributing to traditional and Roth IRAs, the 2026 limits and Roth phase-out ranges.
• IRS, Publication 590-B: conversions, the five-year rule for converted amounts, and how IRAs are combined for the pro-rata rule.
• Tax Cuts and Jobs Act of 2017: the end of recharacterising Roth conversions from 2018.

Checked 10 November 2026. This guide is general information, not tax or investment advice. For a conversion with pre-tax money involved, check the numbers with a tax professional before you act; a conversion can’t be reversed.