Backdoor Roth IRA Explained

The plain answer

A backdoor Roth IRA is a two-step strategy. You make a nondeductible contribution to a traditional IRA, then convert that money to a Roth IRA.

For 2026, the IRA contribution limit is $7,500 across all of your traditional and Roth IRAs. The strategy does not create extra contribution room. It can give someone who cannot contribute directly to a Roth IRA another path to move money into one.

This is not a special account or a risk-free loophole. It is a series of transactions governed by the normal IRA contribution, conversion, and tax rules.

How it actually works

First, you contribute after-tax money to a traditional IRA and report the contribution as nondeductible. Next, you convert some or all of the traditional IRA balance to a Roth IRA. A Roth conversion has no income limit, but the taxable amount depends on all of your traditional IRA money.

The pro-rata rule is the key complication. The IRS generally looks at the combined year-end balance of your traditional, SEP, and SIMPLE IRAs. You cannot choose to convert only the after-tax dollars while leaving pre-tax IRA dollars untouched.

For example, if 10% of your combined IRA money is after-tax basis, roughly 10% of a conversion is treated as nontaxable. The rest is generally taxable income. An existing rollover IRA can therefore make a backdoor Roth conversion much messier and more expensive than expected.

Keeping records matters. Form 8606 tracks nondeductible IRA contributions and helps prevent the same money from being taxed twice. A contribution and conversion can also fall in different tax years, which requires careful reporting.

What this means for you

Before using this strategy, add up every traditional, SEP, and SIMPLE IRA you own and identify how much is pre-tax money versus after-tax basis. Workplace plans such as a 401(k) are not included in the IRA pro-rata calculation, although moving money between accounts can have other consequences.

A backdoor Roth IRA may be worth considering if your income prevents a direct Roth IRA contribution, you have available IRA contribution room, and your existing IRA balances do not create an unwanted tax bill. If you already have substantial pre-tax IRA money, compare the expected tax cost with the benefit of adding money to a Roth account.

Tax forms and timing can be unforgiving. Consider working with a qualified tax professional when you have existing IRA balances, past nondeductible contributions, or multiple transactions.

Common mistakes

• Treating the backdoor Roth as an additional contribution limit
• Deducting the traditional IRA contribution when the plan was to make it nondeductible
• Ignoring traditional, SEP, or SIMPLE IRA balances under the pro-rata rule
• Assuming a separate IRA at another institution avoids aggregation
• Forgetting to file Form 8606 or losing records of after-tax basis
• Expecting every conversion to be tax-free
• Confusing a backdoor Roth IRA with a workplace plan’s mega backdoor Roth strategy

Related pages

• IRA contribution rules
• Who should use a Roth IRA?