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Backdoor Roth IRA: Step-by-Step
Earn $190,000 and the IRS locks you out of a Roth IRA: 2026 phase-outs start at $150,000 single and $236,000 joint. The backdoor Roth is the two-step workaround — fund a traditional IRA with no deduction, then convert it. Total tax owed: close to zero, if the steps are clean.
The Five Steps
- Step 1. Contribute up to $8,000 (with catch-up) to a traditional IRA. Take no deduction — above the income limits you cannot anyway.
- Step 2. Wait for the funds to settle. Investing before converting is allowed, but keep it brief and simple to avoid taxable growth on the pre-conversion side.
- Step 3. Convert the full balance to a Roth IRA. Do this soon after contributing; many custodians finish in a few days.
- Step 4. File Form 8606 with your return. This nondeductible-contribution record is what proves the conversion was already-taxed money.
- Step 5. Repeat every year. There is no IRS limit on conversions, at any income.
The Pro-Rata Rule: Where People Get Burned
Conversion tax is calculated across ALL traditional, SEP, and SIMPLE IRA balances combined, not just the new contribution. A saver with $95,000 of old deductible IRA money and $8,000 of nondeductible contributions converts $8,000 and finds that only 8,000/103,000 — about 7.8% — is tax-free. The other 92% of the conversion is taxable income. The standard fix is rolling pre-tax IRA balances into an employer 401(k) before December 31 of the conversion year, which removes them from the pro-rata calculation entirely.
Rules That Trip Repeat Users
Leave the converted money untouched for five years if you might withdraw earnings early, though principal conversions are penalty-free immediately. Spouses calculate separately — one spouse's high income blocks the other's direct Roth, and the backdoor fixes that too. And keep the money out of the IRA until the contribution has actually settled; contributing and converting the same day works at some custodians but creates paperwork risk at others.
High earners wanting far larger annual moves should look at the mega backdoor Roth through an employer plan, where up to roughly $46,000 of extra after-tax space can be converted depending on the plan's terms.
This article is general educational information only, not financial, tax, investment, accounting, or legal advice, and is not a recommendation to buy, sell, or hold any product or security. Figures reflect published IRS, HMRC, and Social Security Administration guidance for 2026 and are subject to change and annual indexing; always confirm current thresholds with the official source before acting. Rules differ by country, state, and personal situation, and nothing here creates a fiduciary or advisory relationship. This site is supported by advertising, which does not influence our editorial conclusions. For any decision with real financial consequences, consult a licensed fiduciary advisor or tax professional.