Every year, a wall goes up between high earners and the Roth IRA. Once your income climbs past the annual phase-out range, you are no longer allowed to contribute directly to a Roth. And every year, a perfectly legal workaround lets those same earners fund one anyway. It is called the backdoor Roth, and while the nickname sounds shady, it is built from two ordinary moves the tax code has allowed for years.
Here is why it matters: a Roth IRA is one of the few places where investment growth can escape income tax entirely. Qualified withdrawals in retirement are tax-free, and the original owner never faces required minimum distributions. For someone in their peak earning years who expects meaningful tax rates in retirement, that is valuable real estate. The backdoor route is how people above the income limits keep buying it.
Why the front door is closed for some earners
Direct Roth IRA contributions phase out once your modified adjusted gross income passes thresholds that the IRS adjusts each year; the current ranges are published with the annual retirement plan limits on the IRS Roth IRA pages. Above the top of the range, your allowed direct contribution is zero.
But notice what the law does not restrict. There is no income limit on making a nondeductible contribution to a traditional IRA. And since 2010, there has been no income limit on converting a traditional IRA to a Roth. Put those two facts side by side and the backdoor appears.
The two steps, in order
Step one: contribute to a traditional IRA and claim no deduction for it. For 2026 the IRA limit is $7,500, plus a $1,100 catch-up if you are 50 or older. Because your income is high and you likely have a workplace plan, the contribution would not have been deductible anyway. You will report it as nondeductible on Form 8606, which establishes your basis, the money that has already been taxed.
Step two: convert that traditional IRA money to a Roth IRA. Your brokerage does this with a form or a few clicks. If the account held only your fresh after-tax contribution and it had no time to grow, the conversion generates little or no additional tax, because you are converting money that was already taxed. Any earnings that accrued between contribution and conversion are taxable in the year of the conversion, which is why most people convert promptly rather than letting the money sit.
That is the whole maneuver. Money that could not walk in the front door of a Roth arrives through a conversion instead, and once inside, it grows under the same tax-free rules as any other Roth dollar.
The pro-rata rule can spoil the math
The catch, and it is a big one, is the pro-rata rule. When you convert, the IRS does not let you point to the specific dollars you want to move. It looks at all of your traditional, SEP, and SIMPLE IRAs combined as of December 31 of the conversion year and treats every conversion as a proportional blend of pretax money and after-tax basis, as worked through in Publication 590-B.
An example makes it concrete. Suppose you have $92,500 of old pretax money in a rollover IRA and you add a $7,500 nondeductible contribution, bringing your total IRA balance to $100,000. Your after-tax basis is 7.5 percent of the total. Convert $7,500 and only 7.5 percent of it, about $563, comes out tax-free; the rest is taxable income. The backdoor still works mechanically, but the tax-free advantage largely evaporates.
The common fix is to clear the decks first: many workplace 401(k) plans accept roll-ins of pretax IRA money. Move the old pretax balance into your employer’s plan, leave your IRAs holding nothing but the new after-tax contribution, and the pro-rata math turns clean. Whether that trade makes sense depends on your plan’s investment menu and fees, so look before you leap.
Paperwork and timing details that matter
Form 8606 is the backbone of this strategy. File it for the year of the nondeductible contribution and again to report the conversion. Skip it and the IRS has no record that your contribution was already taxed, which can lead to the same dollars being taxed twice. Keep copies permanently.
Two timing notes. First, the contribution and conversion are separate events; a contribution made in early 2027 can even count for tax year 2026, but a conversion always lands in the calendar year it happens. Second, each converted amount has its own five-year clock for penalty-free access before age 59 and a half, a detail covered in Publication 590-A and 590-B that mostly matters to early retirees.
Who should think twice
If your income is under the Roth limits, skip the choreography and contribute directly. If you hold large pretax IRA balances you cannot roll into a workplace plan, the pro-rata rule may make the backdoor unattractive. And if you expect a much lower tax bracket in retirement, pretax saving may simply beat Roth saving for you. The backdoor Roth is a solid tool for a specific person: a high earner with little or no pretax IRA money who wants tax-free growth and is willing to file one extra form a year. For that person, it is about as close to a free lunch as the tax code offers.
