A backdoor Roth IRA lets high-income savers fund a Roth IRA by making a nondeductible Traditional IRA contribution and then converting it to Roth. You contribute after-tax dollars, convert promptly, and report both steps on Form 8606. A backdoor Roth IRA is a two-step funding method, not a separate account type. It helps earners above direct-Roth income ceilings still build Roth savings.
Table of Contents
- Who needs this route?
- How much can you contribute?
- What are the three steps?
- Why can part of the conversion be taxable?
- When do withdrawals escape tax?
Who needs this route?
High earners lose direct Roth access once income passes the phase-out. For 2025, the range is $150,000-$165,000 for single and head of household filers and $236,000-$246,000 for joint filers, according to the IRS in the 2025 limits announcement.
For 2026, the phase-out rises to $153,000-$168,000 for single and head of household filers and $242,000-$252,000 for joint filers. Earners above those ceilings remain in the backdoor audience.
How much can you contribute?
The annual IRA cap covers all Traditional plus Roth IRAs combined. For 2025, it is $7,000 under age 50 and $8,000 at age 50 or older, rising to $7,500 and $8,600 for 2026, the IRS states in its retirement arrangements guide.
Contributions also cannot exceed taxable compensation. Anyone with compensation can contribute to a Traditional IRA. The deduction phases out when you are covered by a workplace plan, so many high earners contribute on a nondeductible basis.
What are the three steps?
The process has three parts: fund, convert, and report. Keep the contribution and conversion close together to limit taxable earnings.
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Form 8606 separates after-tax basis from pre-tax amounts. Part I reports the nondeductible contribution, and Part II reports the Roth conversion, preventing double tax on the same dollars.
- Contribute after-tax dollars to a Traditional IRA, up to the annual cap.
- Convert that Traditional IRA balance to a Roth IRA.
- File Form 8606 to report nondeductible basis and the conversion.
Why can part of the conversion be taxable?
Tax is owed only on pre-tax amounts and earnings. A prompt conversion of pure after-tax basis is therefore nearly tax-free because little or no earnings have accrued.
An existing pre-tax balance changes the result. Under the pro-rata rule, the IRS looks at all Traditional, SEP, and SIMPLE IRA balances together, so part of any conversion becomes taxable. Many savers roll pre-tax IRA funds into a 401(k) first, leaving the IRA with only after-tax basis for conversion.
When do withdrawals escape tax?
Converted dollars then grow under Roth rules. Earnings escape tax only in a qualified distribution, generally after the 5-year holding period and after age 59 1/2, death, or disability.
That timing rule applies to earnings, not to the already-taxed basis. Check pre-tax IRA balances before year-end if you want a clean conversion.
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