Step-by-step guide
Backdoor Roth IRA: Step-by-Step Guide (2026)
For high earners above the Roth income limit ($165,000 single / $246,000 MFJ in 2026), the backdoor Roth provides access to Roth tax-free growth at any income level. Here is the complete process: five steps, the pro-rata rule, and a Form 8606 walkthrough.
What Is the Backdoor Roth IRA?
The backdoor Roth is a two-step process that allows high earners to fund a Roth IRA even when they are above the direct-contribution income limit. Step one: make a non-deductible contribution to a Traditional IRA. Step two: convert the Traditional IRA to a Roth IRA. Because your basis equals your contribution, the conversion is tax-free.
The strategy is legal. Congress has been aware of it since it became widely used, and the 2018 conference report on the Tax Cuts and Jobs Act explicitly sanctioned the two-step approach. There is no income limit on IRA conversions, only on direct Roth contributions.
Who needs it
Single filers above $165,000 MAGI or MFJ above $246,000. Below those thresholds, direct Roth is available and simpler.
How much
$7,000 per year under 50, $8,000 if 50+. Each spouse does their own: $14,000-$16,000 total for MFJ couples.
The Five Steps
Open both a Traditional IRA and Roth IRA at the same broker
If you already have both accounts at the same broker, skip this step. Using the same broker makes the conversion a single click. Fidelity, Schwab, and Vanguard all support this in their online portals. Recommended: open both accounts in the same login session.
Contribute to the Traditional IRA
Contribute up to $7,000 ($8,000 if 50+) to the Traditional IRA. Choose 'non-deductible' as the contribution type (this is determined on your tax return, not at the broker level). The broker will accept the cash regardless. Keep records of the amount contributed.
Wait for the cash to settle (typically 1-3 business days)
Some advisors recommend waiting 1-2 days for the contribution to clear before converting. This is conservative practice, not legal requirement. Same-day conversions are legal and commonly done without IRS challenge. Some brokers require a short settlement period before the conversion is available.
Convert the Traditional IRA to Roth
In your broker's online portal, initiate a 'Convert to Roth IRA' or 'Roth conversion' transaction. Convert the entire balance of the Traditional IRA (not just the contribution amount) to ensure no taxable income remains in the Traditional IRA. Brokers will show you a summary before you confirm.
File Form 8606 with your tax return
Form 8606 Part I records your non-deductible contribution and computes your basis. Part II records the conversion. The result: $0 taxable income from the conversion (basis equals contribution). Keep every Form 8606 permanently. It is your proof of basis if the IRS ever questions a future distribution.
Critical: the pro-rata rule
The Pro-Rata Rule: What It Is and How to Avoid It
The pro-rata rule triggers when you have pre-tax IRA money. The IRS treats ALL of your Traditional IRA balances (including SEP-IRA and SIMPLE IRA) as a single pool when calculating the taxable portion of any conversion. If you have pre-tax IRA money, you cannot just convert the after-tax part tax-free.
Worked example
Pre-tax IRA balance (old 401k rollover): $63,000
New non-deductible contribution (basis): $7,000
Total IRA balance on 12/31: $70,000
Pre-tax fraction: $63,000 / $70,000 = 90%
Taxable portion of $7,000 conversion: $6,300
Non-taxable portion: $700
Result: a $6,300 taxable conversion at your marginal rate. This largely defeats the purpose of the backdoor Roth.
The solution: roll pre-tax IRA balances into your 401(k)
If your employer 401(k) plan accepts incoming rollovers (most do), roll all pre-tax Traditional IRA, SEP-IRA, and SIMPLE IRA balances into the 401(k) before December 31 of the year you execute the backdoor Roth. This removes the pre-tax pool entirely, leaving only the after-tax $7,000 in your IRA. The conversion is then fully tax-free.
Form 8606: Line-by-Line Walkthrough
Form 8606 tracks your IRA basis (non-deductible contributions). It must be filed for the year you made a non-deductible contribution AND for the year you converted. For a clean backdoor Roth (no other IRA balances, same-year contribution and conversion), the form is straightforward.
Enter your non-deductible contributions for 2026
$7,000Your total IRA basis from prior years (prior Form 8606 line 14)
$0 (if first time)Line 1 + Line 2 = total basis
$7,000December 31 FMV of ALL Traditional/SEP/SIMPLE IRAs (should be $0 if converted entire balance)
$0Taxable portion of distribution or conversion (Part I)
$0 if Line 6 is $0Amount converted from Traditional IRA to Roth
$7,000Taxable amount of conversion (after pro-rata)
$0Keep every Form 8606 permanently. You will need the cumulative basis tracking when you take distributions, potentially decades from now. Loss of Form 8606 records can result in double taxation.
Broker-Specific Notes
Fidelity
EasiestTwo-click 'Convert to Roth IRA' link on the Traditional IRA page. Online conversion is seamless and typically processes same day.
Schwab
Very easyOnline conversion form in account management. Straightforward UI. Processes quickly.
Vanguard
EasySlightly clunkier UI than Fidelity/Schwab but fully supported online. May require a phone call for first-time conversion at some account types.
Robinhood
SupportedRobinhood IRA supports conversions since the IRA launch. Less battle-tested with Form 8606 workflows. Verify current UI before executing.
M1 Finance
Via supportAs of last check (April 2026), M1 requires a support request rather than self-service conversion. Confirm current process with M1 before contributing.
Broker UI details verified April 2026. Interfaces change. See full provider comparison →
Common Backdoor Roth Mistakes
Forgetting to file Form 8606
The most common error. Without Form 8606, the IRS has no record of your non-deductible basis. Future distributions may be taxed as if fully pre-tax.
Ignoring the pro-rata rule
Having a rollover IRA from an old 401k and not rolling it into the new 401k before executing backdoor Roth triggers the pro-rata rule and a partially taxable conversion.
Converting with a small pre-tax balance
Even $500 left in a Traditional IRA from a prior year creates pro-rata exposure. Convert everything or roll it out.
Confusing contribution year with conversion year
If you contribute in December 2026 and convert in January 2027, the contribution is on 2026 Form 8606 Part I and the conversion on 2027 Form 8606 Part II.