The backdoor Roth, step by step

How it works

Three steps, the same every year. See where the income line falls.

1. Put money in a traditional IRA, up to $7,500, or $8,600 if you are 50 or older on December 31, by April 15, 2027 for 2026. You don’t deduct it; it becomes your basis, money already taxed.

2. Convert it to a Roth IRA. A provider can do it within the same account. You owe tax only on what isn’t basis, which is whatever it earned in between, so converting soon after leaves little or nothing to tax.

3. File Form 8606 with your return. Part I records the nondeductible contribution and Part II the conversion. Skip it and the IRS treats the contribution as deductible and taxes it again on the way out.

The pro-rata rule

The one thing that makes a backdoor Roth cost tax.

A conversion can’t take only the after-tax dollars. Form 8606 weighs your basis against everything in your traditional IRAs, SEP and SIMPLE IRAs included, at their value on December 31 of the year you convert, and that share of the conversion is tax free.

Put $7,500 in beside $67,500 rolled over from an old job’s 401(k), and only 10% of what you convert is tax free: converting $7,500 adds $6,750 to your income.

If your 401(k) or Solo 401(k) takes money in from IRAs, moving the pre-tax money there before December 31 takes it out of the sum. A 401(k) itself never counts, and each spouse’s IRAs are counted separately.

Timing

Two years can be in play. Money for 2026 can go in until April 15, 2027, but a conversion counts in the year it happens. Put in 2026’s money in early 2027 and convert it then, and Form 8606 shows the contribution for 2026 and the conversion for 2027.

December 31 is the snapshot. The pro-rata rule uses your IRAs’ value at the end of the year you convert, not the day you convert, so pre-tax money rolled into an IRA later that year still counts.

No undo. A conversion can’t be reversed back to a traditional IRA.

Five years per conversion. Under 59½, taking converted money out within five years of its conversion can cost the 10% additional tax on the part that was taxed when it was converted. Each conversion has its own five years.

The mega backdoor Roth

The same idea inside a 401(k), with far more room.

Everything going into one employer’s 401(k) for you can reach $72,000 in 2026: your own $24,500, the employer’s money and after-tax money (not the same as Roth contributions). Catch-ups sit on top. What your own part and the employer leave can go in after tax: with a $10,000 match, $37,500.

Until it becomes Roth, what after-tax money earns is taxed when it comes out. Some plans convert it inside the plan, an in-plan Roth rollover, where only what it earned before converting is taxed. Others let you take it out while you still work, and the after-tax dollars can go to a Roth IRA with their earnings going to a traditional IRA.

It needs a plan that takes after-tax money and allows one of those, and many don’t, so ask. Working for yourself, a Solo 401(k) can be set up to do it. It comes after the rest of the 401(k) in the savings waterfall, for people past the Roth IRA’s line.

Questions people ask