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The backdoor Roth IRA, step by step
The short answer
High earners locked out of direct Roth IRA contributions can contribute to a traditional IRA (nondeductible) — $7,500 in 2026 — then convert it to Roth. Result: Roth money at any income. The trap is the pro-rata rule: existing pre-tax IRA balances make the conversion partly taxable, so the clean setup clears those first (often by rolling them into your 401(k)).
How it works
- Clear the runway: roll pre-tax traditional/SEP/SIMPLE IRA money into an employer 401(k) or your Solo 401(k) first.
- Contribute $7,500 (2026) to a traditional IRA as a nondeductible contribution.
- Convert to Roth promptly — with no pre-tax balances and no earnings, the conversion is essentially tax-free.
- File Form 8606 reporting the basis and conversion. Keep it every year, forever.
- Repeat annually. Spouses each get their own.
Married physicians, both over the limit
Where it goes wrong
- Converting while a $200k rollover IRA sits in the background — pro-rata makes most of it taxable
- No Form 8606, or a preparer who has never seen one — double taxation risk
- Contributing to Roth directly, discovering the income limit in March, and needing a recharacterization cleanup
Frequently asked questions
Who needs the backdoor Roth?
Anyone over the Roth IRA income phase-out — for 2026, single filers above roughly $168,000 MAGI and joint filers above roughly $252,000 lose direct contribution ability. The backdoor route has no income limit.
What is the pro-rata rule?
If you hold any pre-tax IRA money (traditional, SEP, SIMPLE), conversions are taxed proportionally across ALL your IRA balances. Clearing pre-tax IRAs first, often by rolling them into a 401(k), is what makes the backdoor clean.
How do I report it?
Form 8606 tracks the nondeductible contribution and the conversion. A missing or wrong 8606 is the most common backdoor error — it can cause the same dollars to be taxed twice.
Contribute and convert in the same year?
Common practice is contributing and converting promptly. Clean execution and correct reporting are what matter.
Want it executed cleanly?
We check the pro-rata picture, run the conversion sequence, and make sure the 8606 is right — every year, both spouses.
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