Backdoor Roth IRA: Step-by-Step for High Earners

If your income is above the Roth IRA contribution limit ($165,000 single / $246,000 married filing jointly in 2025), you are not allowed to contribute directly. The backdoor Roth IRA gets you in legally — but only if you avoid one tax landmine called the pro-rata rule.

The four steps

1. Open a Traditional IRA at a major brokerage (Fidelity, Schwab, Vanguard).
2. Contribute $7,000 ($8,000 if 50+) — non-deductible because you are over the income limit anyway.
3. Convert the entire balance to a Roth IRA immediately. Most brokerages let you do this in two clicks.
4. File IRS Form 8606 with your tax return to report the non-deductible basis and the conversion.

Because the contribution is non-deductible and the conversion happens before any growth, the tax owed is approximately zero.

The pro-rata rule (the landmine)

The IRS treats all of your Traditional, SEP, and SIMPLE IRAs as one big pot when calculating the tax on a conversion. If you have any pre-tax dollars in any of those accounts, a portion of your conversion will be taxable based on the ratio of pre-tax to total IRA balance.

Example: You contribute $7,000 to a new Traditional IRA, but you also have $63,000 of pre-tax money in a Rollover IRA from a previous job. Your pre-tax ratio is $63,000 / $70,000 = 90%. $6,300 of your $7,000 conversion is taxable. That is not what most people expect.

Two ways around the pro-rata rule

1. Roll your pre-tax IRAs into your 401(k) before doing the backdoor Roth. Workplace 401(k) balances do not count toward the pro-rata calculation. This is the cleanest fix if your plan accepts rollovers (most do).
2. Convert everything to Roth in one shot and pay the tax. Worth it for some high earners, especially in a low-income year.

The spousal backdoor

If your spouse does not work, they can still do a backdoor Roth using your income — just open a Traditional IRA in their name and follow the same steps. That doubles your household's annual Roth contribution to $14,000.

Watch the timing

The IRS considers a conversion a one-step event. Contribute today, convert tomorrow, file Form 8606 by April 15. Waiting weeks or months between contribution and conversion is fine — but earnings during that time become taxable on conversion.

Common mistakes

• Ignoring the pro-rata rule. The single biggest mistake — and the most expensive.
• Forgetting Form 8606. Without it, the IRS may tax both the original contribution and the conversion.
• Choosing "Roth contribution" instead of "non-deductible Traditional." If your income is over the limit, a direct Roth contribution triggers a 6% annual excess contribution penalty.

Want to see if a backdoor Roth fits into your overall plan? RetirementCheck101 flags the opportunity automatically and sizes the tax impact for your situation.