Financial & Tax

Backdoor Roth IRA Conversion

Difficulty Intermediate Risk Low Applies To All Potential Savings $5,000 - $50,000+ over a lifetime Last Verified 2026-02-10

Backdoor Roth IRA Conversion

What Is It?

High-income earners are normally barred from contributing directly to a Roth IRA once their modified adjusted gross income (MAGI) exceeds certain thresholds ($161,000 for single filers, $240,000 for married filing jointly in 2024). However, there is no income limit on converting a Traditional IRA to a Roth IRA. The “Backdoor Roth IRA” strategy exploits this gap by making a non-deductible contribution to a Traditional IRA and then immediately converting it to a Roth IRA.

How It Works

  1. Contribute to a Traditional IRA. Make a non-deductible contribution up to the annual limit ($7,000 for 2024, $8,000 if you’re 50 or older). You do not claim a tax deduction for this contribution.
  2. Convert to a Roth IRA. Shortly after the contribution settles, request a Roth conversion with your brokerage. Since you already paid taxes on the contribution (it was non-deductible), the conversion itself incurs little to no additional tax — as long as the funds haven’t gained significant value between the contribution and conversion.
  3. Report on your tax return. File IRS Form 8606 to document the non-deductible contribution and the conversion.

Important Caveats

  • Pro Rata Rule: If you have existing pre-tax money in any Traditional IRA (including SEP or SIMPLE IRAs), the IRS treats all your IRAs as one pool for tax purposes. This means a portion of your conversion will be taxable. The workaround is to roll any existing pre-tax IRA balances into a 401(k) before doing the conversion.
  • Convert quickly. If the funds grow between the contribution and conversion, you’ll owe taxes on the gains. Most people convert within a few days to minimize this.
  • Congress has considered closing this. The Build Back Better Act (2021) included provisions to eliminate backdoor Roth conversions for high earners, but those provisions did not pass. As of early 2026, the strategy remains fully legal.

Who Benefits Most?

High-income earners who exceed the Roth IRA income limits but want access to tax-free growth and tax-free withdrawals in retirement. Over a 20-30 year investing horizon, the tax-free compounding can result in tens of thousands of dollars in savings.

  • IRC § 408A(d)(3) — Governs Roth IRA conversions and places no income limit on conversions.
  • IRC § 408(o) — Allows non-deductible contributions to a Traditional IRA regardless of income.
  • IRS Form 8606 — The required reporting form for non-deductible IRA contributions and conversions.
  • IRS Publication 590-A — Contributions to Individual Retirement Arrangements, covering Traditional and Roth IRAs.

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