Backdoor Roth IRA
Guide · By Kevin Lan · Updated September 2026
A backdoor Roth IRA is a legal, two-step way for high earners to put money in a Roth IRA when their income is above the direct-contribution limit: contribute to a traditional IRA, then convert it to a Roth.
What a backdoor Roth is
A backdoor Roth IRA is a two-step method to fund a Roth IRA when your income exceeds the Roth contribution limit: you make a nondeductible contribution to a traditional IRA, then convert that money to a Roth IRA. It works because the tax code caps direct Roth contributions by income but places no income limit on Roth conversions (that limit was removed in 2010). Each step is legal on its own; done in sequence, they move after-tax money into a Roth you could not contribute to directly.
Who needs it: the Roth income limits
Direct Roth IRA contributions phase out at higher income. For 2025, the ability to contribute directly phases out between a modified adjusted gross income (MAGI) of $150,000 and $165,000 for single filers, and $236,000 and $246,000 for married couples filing jointly. Above the top of the range you cannot contribute to a Roth directly at all, and the backdoor is the workaround. These thresholds are set annually by the IRS and rise most years.
The steps
- Contribute to a traditional IRA, nondeductible. Put up to the annual limit ($7,000 in 2025, or $8,000 if you're 50 or older) into a traditional IRA and don't deduct it. High earners covered by a workplace plan usually can't deduct it anyway.
- Convert to a Roth IRA. Move that balance to a Roth IRA. Many people convert soon after contributing, so there's little or no growth to be taxed.
- Report it on Form 8606. File IRS Form 8606 to record the nondeductible contribution and the conversion, so your after-tax basis isn't taxed a second time.
Because the contribution was already taxed, only any earnings between the contribution and the conversion are taxable, usually a small amount when you convert promptly.
The pro-rata rule: the trap that catches most people
The single biggest mistake is ignoring the pro-rata rule. The IRS treats all your traditional, SEP, and SIMPLE IRAs as one combined account when figuring the taxable share of a conversion. If you hold pre-tax money in any of them, you cannot convert only the after-tax dollars: the conversion is taxed in proportion to the pre-tax share of your total IRA balance.
For example, you make a $7,000 nondeductible contribution but already hold $63,000 of pre-tax money in a rollover IRA. Your IRAs now total $70,000, of which 90% is pre-tax, so 90% of a $7,000 conversion ($6,300) is taxable, even though you meant to convert only the new after-tax money. The pre-tax balance doesn't disappear; it just makes the backdoor expensive.
Clearing the way: the 401(k) roll-in
The usual fix is to remove pre-tax money from your IRAs before the conversion. If your employer's 401(k) accepts roll-ins, you can roll your pre-tax traditional, SEP, and SIMPLE IRA balances into the 401(k), which is not counted in the pro-rata calculation. That leaves only the after-tax contribution in your IRA, so the conversion is nearly tax-free. The IRA balance that counts is measured on December 31 of the conversion year, so the roll-in has to be finished by year-end.
Why it matters for FIRE
For high earners pursuing financial independence, the backdoor Roth adds $7,000 a year of Roth space that would otherwise be closed to them. Roth dollars grow tax-free, have no required minimum distributions, and let you withdraw your contributions anytime, which makes them a flexible bridge in an early-retirement plan. A related but separate move, the mega backdoor Roth, uses after-tax 401(k) contributions converted to Roth and can move far more each year, but only if your specific plan allows after-tax contributions and in-plan conversions.
First, know your number
Tax-account strategy is the layer on top of a plan. The calculator below finds your FIRE number and the year you reach it from your own figures, and the iPhone app keeps that date on your home screen as your investments grow. This is educational information, not tax advice. The pro-rata rule and the reporting are easy to get wrong, so confirm your situation with a qualified professional.
References
- Internal Revenue Service. Roth IRAs: contribution and distribution rules. irs.gov
- Internal Revenue Service. Publication 590-A: Contributions to Individual Retirement Arrangements (IRAs). irs.gov/publications/p590a
- Internal Revenue Service. Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs). irs.gov/publications/p590b
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Frequently asked questions
Is a backdoor Roth IRA legal?
Yes. It combines two legal steps: a nondeductible traditional IRA contribution and a Roth conversion, which has had no income limit since 2010. Congress has acknowledged the strategy in legislative history. You report it on IRS Form 8606; the real risk is the pro-rata rule, not legality.
What is the pro-rata rule for a backdoor Roth?
The IRS treats all your traditional, SEP, and SIMPLE IRAs as one account when taxing a conversion. If you hold pre-tax IRA money, only part of your conversion counts as the after-tax contribution and the rest is taxable, in proportion to the pre-tax share of your total IRA balance on December 31.
How do I avoid tax on a backdoor Roth?
Convert soon after contributing so there's little growth to tax, and clear pre-tax IRA balances first, usually by rolling them into a 401(k) that accepts roll-ins, since 401(k) money isn't counted in the pro-rata calculation. Then only the new after-tax contribution is converted.
What is the income limit for a backdoor Roth IRA?
There isn't one. The income limit applies to direct Roth contributions (phasing out in 2025 at $150,000 to $165,000 for single filers and $236,000 to $246,000 for joint filers). Roth conversions, the second step of the backdoor, have no income limit, which is what makes it work.
What's the difference between a backdoor Roth and a mega backdoor Roth?
A backdoor Roth moves up to the IRA limit ($7,000 in 2025) from a nondeductible traditional IRA to a Roth IRA. A mega backdoor Roth moves much larger after-tax contributions inside a 401(k) to Roth, but only if your plan allows after-tax contributions and in-plan Roth conversions.