The Backdoor Roth: How High Earners Still Get Money Into a Roth IRA

Most of my clients can't contribute to a Roth IRA. At least not the normal way.

The IRS sets income limits on Roth contributions. For 2026, the ability to contribute starts phasing out at $242,000 of modified adjusted gross income for married couples filing jointly. Above $252,000, you're locked out completely. Single filers get locked out above $168,000. If you're reading this blog, there's a good chance that's you.

But there's a legal way around it. It's called the backdoor Roth, and it's been standard practice for high earners since 2010. It isn't aggressive. Congress has known about it for years and left it alone. But there's one rule that trips people up, and getting it wrong turns a tax-free move into a taxable one.

Why Bother With a Roth at All

A Roth IRA grows tax-free. You put money in after paying tax on it. From then on, the growth is never taxed. The withdrawals in retirement are never taxed. There are no required minimum distributions during your lifetime. Your kids can inherit it and take the money out tax-free too.

For someone in a high bracket with decades of growth ahead, that's a valuable bucket to fill. The problem is the front door is closed, so you use the back door.

How the Backdoor Roth Works

Two steps.

Step one: Contribute non-deductible dollars to a traditional IRA. There's no income limit on making a traditional IRA contribution. Anyone with earned income can do it. For 2026, the limit is $7,500, or $8,600 if you're 50 or older. At your income, the contribution won't be deductible. You're putting in after-tax money. That's the point.

Step two: Convert that traditional IRA money to a Roth IRA. There's no income limit on conversions either. There hasn't been since 2010. Since you already paid tax on the money you put in, the conversion itself costs you little or nothing in tax. If the money earned a few dollars between the contribution and the conversion, you pay tax on those few dollars. That's it.

The paperwork is next. You report the nondeductible contribution on Form 8606 with your tax return. That form is what proves to the IRS that your contribution was after-tax money. Skip it and you risk paying tax on the same dollars twice.

A married couple can each do this. That's $15,000 a year into Roth accounts, every year.

The Rule That Ruins It: Pro-Rata

Here's where people get hurt.

When you convert money from a traditional IRA, the IRS doesn't let you pick which dollars you're converting. It looks at all of your traditional IRA money, every traditional IRA, SEP IRA, and SIMPLE IRA you own, added together, and treats your conversion as a proportional slice of the whole pile. This is the pro-rata rule. The measurement date is December 31 of the year you convert.

If your only IRA money is the $7,500 you just contributed after-tax, the math is clean. The pile is 100% after-tax. The conversion is tax-free.

But if you have old pre-tax IRA money sitting somewhere like a rollover from an old 401(k), then the math changes fast.

An Example

Meet Sarah. She's a physician earning $500,000. She's married, files jointly, and is well above the Roth income limit. She wants to do a backdoor Roth.

Sarah contributes $7,500 after-tax to a traditional IRA in January 2026. So far so good.

But Sarah also has a $142,500 rollover IRA from a hospital job she left five years ago. All of it is pre-tax money.

Now her total IRA pile is $150,000. Only $7,500 of it — 5% — is after-tax. When she converts $7,500 to a Roth, the IRS says 95% of that conversion is pre-tax money. She owes ordinary income tax on $7,125 of it. At her bracket, that's roughly a $2,500 tax bill on a move she expected to be free. And she still has $135,000 of pre-tax money sitting in the rollover IRA, so the same problem repeats every year she tries this.

The backdoor didn't fail, it's just that it's not all tax-free like she expected.

The Fix

The standard fix for Sarah is simple: move the pre-tax rollover IRA into her current employer's 401(k). Most plans accept incoming rollovers. Money inside a 401(k) doesn't count in the pro-rata math, because the rule only looks at IRAs.

Once the rollover IRA is empty, her December 31 IRA balance is just the after-tax contribution. The pile is clean. The conversion is tax-free. And it stays clean every year going forward.

The order matters. Empty the pre-tax IRAs first, in the same calendar year you convert. December 31 is the snapshot date. A rollover completed in January of the next year doesn't help you for this year's conversion.

A Few More Things Worth Knowing

Don't let the money sit. Convert soon after you contribute. Any earnings between the contribution and the conversion are taxable. A few days of interest is pennies. A year of market growth is a real tax bill.

File Form 8606 every year you do this. It tracks your after-tax basis. It's the paper trail that protects you.

The strategy is settled law. For years, people worried the IRS would attack the two-step move as one disguised transaction. Congress put that to bed in the 2017 tax act. The official committee reports acknowledged the backdoor Roth by name as a permitted strategy. Your CPA should not be scared of this.

This pairs well with everything else. The backdoor Roth doesn't compete with real estate strategies. Most of my clients run it every January as a routine habit, the same way they'd fund an HSA. Small move, repeated for twenty years, at tax-free growth rates. The math adds up.

Bottom Line

The backdoor Roth is one of the few strategies that works at any income level, takes about twenty minutes a year. The whole strategy is the setup: clean out the pre-tax IRAs first, convert quickly, file the form. Get those three things right and it runs on autopilot. Get the pro-rata rule wrong and you've converted a tax-free move into a taxable one, and locked yourself into the same mistake until you fix it.

If you're above the Roth income limits and you're not doing this, or you have an old rollover IRA and aren't sure whether the pro-rata rule catches you, book a discovery call. I work with high-income earners across all 50 states.