A backdoor Roth IRA lets you get money into a Roth IRA even when your income is too high for a direct contribution. For 2026, direct Roth IRA contributions phase out between $153,000 and $168,000 of income for single filers ($242,000 to $252,000 joint). The backdoor route has no income limit: contribute $7,500 to a traditional IRA without taking the deduction, then convert it to Roth. Five steps, one major trap.

Who is the backdoor Roth for?

You, if your modified adjusted gross income exceeds the Roth IRA phase-out and you want Roth dollars anyway. For 2026, that means single filers above $153,000 and joint filers above $242,000, with the phase-out completing at $168,000 and $252,000 respectively. (IRS IR-2025-111) It is also for people who are covered by a workplace plan and phased out of the traditional IRA deduction, since the strategy uses a non-deductible contribution by design.

Step 1: Check for the pro-rata trap

Before contributing a dollar, add up every pre-tax dollar you hold in traditional, SEP, and SIMPLE IRAs. The tax code aggregates all of these accounts, valued as of December 31 of the year you convert, so a conversion is taxed proportionally across pre-tax and after-tax money. A pre-tax rollover into an IRA later in the same year counts too. If that total is zero, your backdoor Roth will be clean. If it is not zero, deal with it first: the standard move is rolling pre-tax IRA balances into your employer's 401(k), which is not part of the aggregation. Check that your plan accepts roll-ins, and complete the rollover by December 31 of the conversion year. Only pre-tax amounts can go into the 401(k), and SIMPLE IRA money cannot leave the SIMPLE system during its first two years.

This is the step people skip, and it is the one that creates surprise tax bills.

Step 2: Make a non-deductible traditional IRA contribution

Contribute to a traditional IRA and do not deduct it. For 2026 the limit is $7,500 if you are under 50, or $8,600 if you are 50 or older ($7,500 plus the $1,100 catch-up). (IRS IR-2025-111) You need taxable compensation (or a spouse with taxable compensation, if filing jointly) to contribute. You have until the tax filing deadline, generally April 15 of the following year, to make the contribution for the prior tax year. (IRS Instructions for Form 8606)

Step 3: Convert to Roth

Convert the traditional IRA balance to your Roth IRA. There is no income limit on conversions, and neither the Code nor the Form 8606 instructions set a minimum delay between the contribution and the conversion. The step-transaction doctrine comes from case law, not statute, so the absence of a statutory waiting period does not rule it out. The IRS has never formally blessed the backdoor Roth, although the 2017 TCJA Conference Report describes it as permissible. The risk is generally viewed as low for a clean, fully disclosed contribution and conversion, and highest when pre-tax IRA balances are moved around to sidestep the pro-rata rule. Many custodians impose a brief settlement hold on new contributions, so most people convert as soon as the funds clear. If you have no other pre-tax traditional, SEP, or SIMPLE IRA money on December 31 and you convert quickly, the balance has barely grown, so there is almost nothing taxable about the conversion: your after-tax principal moves to Roth tax-free, and only any earnings are taxed as ordinary income.

Step 4: Report it on Form 8606

File Form 8606 with your tax return. It does three jobs: it reports the non-deductible contribution, tracks your after-tax basis so you are never taxed twice on the same dollar, and reports the Roth conversion. (IRS Instructions for Form 8606) File it even in years you only contributed and did not convert. Losing track of basis is how people pay tax twice.

Step 5: Invest the Roth dollars

A Roth IRA holding cash is a missed opportunity. Once converted, invest according to your allocation. Qualified distributions (after age 59.5, and at least five tax years after your first Roth IRA contribution or conversion) come out entirely tax-free, which is the whole point of the exercise. Separately, each conversion has its own 5-year clock: if you are under 59.5 and withdraw converted amounts within five years, the 10% early-withdrawal penalty can apply even though the principal is not taxed again.

How the pro-rata rule works, with numbers

Say you hold $93,000 of pre-tax money in a rollover IRA and make a $7,500 non-deductible contribution, then convert $7,500. The IRS sees $100,500 of total IRA money, of which 7.46% is after-tax basis. Only 7.46% of your $7,500 conversion ($560) is tax-free; the remaining $6,940 is taxable ordinary income. That is the pro-rata rule in action, and it is why Step 1 exists.

Now the clean version: you roll the $93,000 into your 401(k) before year end, leaving the IRA with only the $7,500 of after-tax money. Convert the full $7,500. Taxable amount: effectively zero (plus any small earnings). Same contribution, completely different tax outcome. The difference is entirely in the preparation.

Timing rules that trip people up

• Contribution deadline: April 15 of the following year for the contribution itself.

• Conversion timing: the conversion is reported in the calendar year it actually happens. A contribution made in March 2027 for tax year 2026, converted in March 2027, is a 2027 conversion on your 2027 return.

• The December 31 snapshot: the pro-rata math uses the value of all your traditional, SEP, and SIMPLE IRAs as of December 31 of the conversion year, plus any outstanding rollovers (26 U.S.C. s.408(d)(2); Form 8606 line 6). That is why the 401(k) rollover in Step 1 only helps if the pre-tax money is out of your IRAs by year end.

• Form 8606 follows the contribution year for the non-deductible contribution, and the conversion year for the conversion. Doing both in the same calendar year keeps the paperwork on one return, which is why most people contribute and convert within days of each other.

Pending review by Brian Thomas, EA. Updated September 25, 2026.

This article is free educational content, not tax advice for your specific situation. If you want a plan built around your actual numbers, that is what our paid tax planning engagements do.