What is a Backdoor Roth IRA

A backdoor Roth IRA is a two-step strategy that allows high-income earners who exceed Roth IRA contribution limits to still get money into a Roth IRA by contributing to a Traditional IRA first and then converting it.

A backdoor Roth IRA is a tax strategy — not a special account type — that lets high-income earners fund a Roth IRA even when their income exceeds the IRS limits for direct contributions. It works by making a non-deductible contribution to a Traditional IRA first, and then converting that balance to a Roth IRA shortly after.

The strategy is completely legal and widely used. The IRS has acknowledged it without disallowing it, and financial advisors across the country recommend it to clients who earn too much for a standard Roth IRA contribution.

Why It Exists: Roth IRA Income Limits

Direct Roth IRA contributions phase out at:

Single filers: $150,000–$165,000 MAGI (2025)
Married filing jointly: $236,000–$246,000 MAGI (2025)

Above these thresholds, you can't contribute directly. But there are no income limits on non-deductible Traditional IRA contributions or on Roth conversions — which is the gap the backdoor strategy exploits.

The Two-Step Process

Contribute to a Traditional IRA — Make a non-deductible contribution (up to $7,000 in 2025; $8,000 if 50 or older). Because you're above the income limit for a deductible contribution, you simply receive no tax deduction — this is expected.
Convert to a Roth IRA — Contact your brokerage and request a Roth IRA conversion. The funds move from the Traditional IRA to your Roth IRA. Since you already paid taxes on this money (non-deductible contribution), you generally owe minimal additional tax.

The conversion is reported on IRS Form 8606.

The Pro-Rata Rule: The Key Complication

The backdoor Roth IRA works cleanly only if you have no other pre-tax IRA balances. If you hold funds in a Traditional, SEP, or SIMPLE IRA that were contributed pre-tax (deductible), the IRS applies the pro-rata rule — it treats all your IRA funds as a single pool and taxes the conversion proportionally.

Example: You have $93,000 in a pre-tax Traditional IRA and add $7,000 non-deductible. Your total IRA is $100,000, of which 7% is after-tax. Only 7% of your conversion is tax-free — meaning you owe taxes on 93% of the $7,000 converted.

To avoid this, many high earners roll existing pre-tax IRA balances into their 401(k) before executing the backdoor contribution — if their employer plan accepts incoming rollovers.

Mega Backdoor Roth

Some 401(k) plans allow after-tax contributions beyond the normal limit ($23,500 in 2025), up to the total annual limit of $70,000. If the plan allows in-plan Roth conversions or in-service withdrawals, these after-tax contributions can be converted to Roth — potentially moving up to $46,500 in additional after-tax dollars into Roth status each year. This is called the mega backdoor Roth.

Key Considerations

Convert the Traditional IRA shortly after contributing to minimize any taxable gain in the Traditional IRA before conversion
File Form 8606 with your tax return to document non-deductible contributions and avoid being taxed twice
The strategy is most beneficial for those who expect to be in the same or higher tax bracket in retirement
Consult a tax professional if you have pre-existing IRA balances — the pro-rata rule can create unexpected tax consequences

For those who qualify, combining a 401(k), backdoor Roth IRA, and HSA creates a powerful three-pronged tax-advantaged retirement strategy.