How the backdoor Roth IRA works — and where it goes wrong
Roth IRA contributions phase out above income limits the IRS adjusts each year, which locks many high earners out of the front door. The backdoor is the workaround the tax code itself allows: nondeductible traditional-IRA contributions have no income limit, and neither do Roth conversions. So you contribute after-tax dollars to a traditional IRA — $7,500 is the 2026 limit under Rev. Proc. 2025-32, plus a catch-up for those 50 and over — and convert it to a Roth shortly after. Since the money was already taxed on the way in, converting it should cost little or nothing, and it then grows tax-free forever.
The trap is the IRA aggregation rule. The moment you convert, the IRS doesn't see the tidy new account holding only your after-tax contribution. It sees all of your traditional, SEP, and SIMPLE IRAs poured into one pot — the old 401(k) you rolled into an IRA years ago included — and rules that every converted dollar carries the same pre-tax/after-tax mix as the pot. The classic analogy is cream in coffee: once your after-tax basis is stirred into pre-tax money, you cannot ladle out only the cream. Form 8606 measures the mix and taxes you on the coffee.
The pro-rata formula (Form 8606, Part I)
Nontaxable fraction = Basis ÷ (Dec 31 IRA value + withdrawals + amount converted)
Taxable conversion = Conversion × (1 − fraction)
where basis is line 3 (this year's nondeductible contribution plus prior basis), the denominator is line 9, and the fraction is line 10, capped at 1.000. The valuation date isDecember 31 of the conversion year — converting in January doesn't dodge a rollover that arrives in November. Unused basis carries forward on line 14 and keeps reducing tax in future years, so it is diluted, never destroyed.
Worked example
Here is the trap in action — the calculator's default scenario. An investor contributes $7,500 after-tax and converts it, but still holds a $67,500 rollover IRA from an old 401(k) on December 31:
| Step | Amount |
|---|---|
| After-tax basis (line 3)this year's $7,500 nondeductible contribution — the 2026 IRA limit per Rev. Proc. 2025-32 — with no prior basis | $7,500.00 |
| The pro-rata denominator (line 9)$67,500 still sitting in IRAs on Dec 31 + the $7,500 converted | $75,000.00 |
| ÷ Nontaxable fraction (line 10)$7,500.00 ÷ $75,000.00 — only this share of the conversion counts as your after-tax money | 0.1000 |
| Tax-free part of the conversion (line 11)$7,500 × 0.1000 | $750.00 |
| = Taxable conversion — 90% of it≈ $2,160.00 of tax at a 32% marginal rate, and $6,750.00 of basis left stranded on Form 8606 | $6,750.00 |
Computed with this calculator's default settings — open the tool above and you'll see the same numbers, then substitute your own balances.
Clean backdoor vs. the pro-rata trap
Run the same $7,500 conversion with the rollover IRA emptied before year end and the picture inverts: the nontaxable fraction on line 10 becomes 1.000, the taxable amount falls from $6,750.00 to $0.00, and the estimated tax bill drops from $2,160.00 to $0.00. Same contribution, same conversion, same year — the only difference is what else sat in IRAs on December 31. That is the entire game: a backdoor Roth is clean when your pre-tax IRA balance is zero, and progressively more taxable the more pre-tax money the aggregation rule can find.
Note what the trap does not do: it doesn't fine you, and it doesn't tax the same dollar twice. The $6,750.00of basis that went unused is recorded on Form 8606 and shelters future conversions or withdrawals. The real costs are the surprise tax bill today — ordinary income at your marginal rate — and years of paperwork tracking stranded basis.
Three ways to defuse the pro-rata rule
- The reverse rollover. Employer plans sit outside the aggregation rule, so rolling pre-tax IRA money into a 401(k), 403(b), or solo 401(k) that accepts roll-ins zeroes out line 6. This is the standard cleanup, and it must complete before December 31 of the conversion year. Only pre-tax dollars can make this trip — basis is not allowed into an employer plan.
- Convert everything. Converting the entire pre-tax balance ends the problem permanently — every future backdoor is clean — at the price of one large, fully taxable year. Sometimes worth it in a low-income year; run the bracket math first.
- Keep spouses separate. The rule aggregates per person, not per household. If one spouse carries a large rollover IRA and the other doesn't, the unencumbered spouse can run clean backdoor conversions on their own Form 8606 regardless.
Executing a backdoor Roth, step by step
- Check the aggregation rule first. Add up every traditional, SEP, and SIMPLE IRA you own. If the total is meaningfully above zero, plan the cleanup rollover before anything else — this calculator shows what skipping that step costs.
- Make the nondeductible contribution. Contribute to a traditional IRA and do not claim the deduction. Cash sitting in a settlement fund is fine; it doesn't need to be invested first.
- Convert to Roth. Most custodians do this online in minutes. Converting promptly keeps pre-conversion earnings — which are taxable — near zero, though there is no statutory waiting period to satisfy.
- File Form 8606 with your return. Line 1 records the contribution, line 8 the conversion, and lines 6–14 run the pro-rata math this page mirrors. Filing it correctly is what makes the basis official.
- Repeat annually. The backdoor resets every year with the new contribution limit. Keep each year's Form 8606 — the running basis on line 14 is your proof against double taxation.
See what the converted money becomes over the decades with ourRoth IRA calculator, weigh the deduction-now-vs-tax-free-later question with theRoth vs. traditional calculator, or estimate the marginal rate that applies to the taxable part with theincome tax calculator.
Frequently asked questions
What is a backdoor Roth IRA?
A backdoor Roth IRA is a two-step maneuver for high earners whose income exceeds the Roth IRA contribution limits: contribute to a traditional IRA without taking a deduction (a nondeductible contribution), then convert that money to a Roth IRA. There is no income limit on nondeductible traditional-IRA contributions and none on Roth conversions, so the combination reaches the same destination a direct Roth contribution would. Done cleanly — with no other pre-tax IRA money — the conversion is almost entirely tax-free because you are converting money that was already taxed.
What is the pro-rata rule for Roth conversions?
The pro-rata rule says a conversion cannot cherry-pick your after-tax dollars. The IRS treats every traditional, SEP, and SIMPLE IRA you own as one combined account, and each dollar converted carries the same mix of pre-tax and after-tax money as that combined whole. Form 8606 does the arithmetic: your total basis divided by the sum of your December 31 IRA balances, the year’s withdrawals, and the conversion itself gives the tax-free fraction; everything else is ordinary income. You cannot avoid it by converting from a separate account that holds only the after-tax contribution — separateness is ignored.
How do I avoid the pro-rata rule?
The standard fix is to get pre-tax IRA balances to zero before December 31 of the conversion year. Most people do that with a reverse rollover: moving the pre-tax IRA money into an employer 401(k) or 403(b), which the aggregation rule does not count, if the plan accepts roll-ins. Alternatives are converting the entire pre-tax balance (paying tax on all of it once) or, for the self-employed, adopting a solo 401(k) that accepts incoming rollovers. Timing matters: it is the year-end balance that counts, so the cleanup must be complete before December 31, not before the conversion.
Does my 401(k) or my spouse’s IRA count toward the pro-rata calculation?
No on both. The aggregation rule reaches every traditional, SEP, and SIMPLE IRA in your name, but employer plans — 401(k), 403(b), 457(b), TSP — sit outside it, which is exactly why the reverse rollover works. Spouses are also separate: each files their own Form 8606 over their own IRAs, so one spouse’s large rollover IRA does not contaminate the other’s backdoor Roth. Inherited IRAs you hold as a beneficiary are excluded from the calculation as well.
Is the backdoor Roth legal?
Yes. Each step — a nondeductible traditional IRA contribution and a Roth conversion — is expressly permitted, and Congress acknowledged the combined strategy in the conference report to the 2017 tax act, which noted that taxpayers may make a nondeductible contribution and then convert it. What the law requires is honest reporting: the contribution and conversion both go on Form 8606, and the pro-rata rule is applied to whatever IRA money you actually hold. This calculator exists to get that arithmetic right, not to get around it.
What is Form 8606 and when do I file it?
Form 8606 is the IRS form that tracks nondeductible IRA basis and taxes IRA distributions and Roth conversions. You file it with your return for any year you make a nondeductible contribution, take a distribution while holding basis, or convert to a Roth. It is also your permanent record: line 14 carries unused basis forward year after year, and losing track of it means eventually paying tax twice on the same dollars. If you have made nondeductible contributions in the past without filing, the form can be filed retroactively to establish the basis.
When is the deadline for a backdoor Roth?
The two steps run on different clocks. The traditional-IRA contribution for a tax year can be made until that year’s tax-filing deadline in mid-April — so an early-year contribution can even count for the prior year. The conversion, by contrast, is taxed in the calendar year it happens, with no lookback and, since the 2017 tax act, no undo: recharacterization of conversions was eliminated. The pro-rata test then looks at your IRA balances on December 31 of the conversion year, which is why cleanup rollovers must finish before year end.
Sources
- IRS — About Form 8606, Nondeductible IRAs
- IRS Publication 590-A — Contributions to Individual Retirement Arrangements
- IRS Publication 590-B — Distributions from Individual Retirement Arrangements
- IRS — Retirement topics: IRA contribution limits
The official figures this page quotes are drawn from the primary sources above — check them (or a qualified professional) before relying on a result.
Disclaimer: This calculator is foreducation and illustration only. It mirrors the Form 8606 pro-rata arithmetic but applies a single marginal rate to the taxable amount, which a large conversion can outgrow by crossing brackets; it does not model state taxes, the 3.8% net investment income tax interaction, employer-plan acceptance of rollovers, or every filing situation. The 2026 contribution limit is cited to Rev. Proc. 2025-32; limits change yearly. Nothing here is tax, investment, or legal advice — for a maneuver this consequential, confirm the details with a qualified tax professional.