At a glance
- What it is
- A nondeductible contribution to a traditional IRA, followed by a conversion to a Roth IRA.
- What it saves
- Future tax. Growth in the Roth comes out tax-free in retirement if the Roth rules are met.
- Best fit
- High earners above the Roth income limits.
- Main catch
- The pro-rata rule. Other pre-tax IRA money can make most of the conversion taxable.
- 2026 limit
- $7,500 per spouse, or $8,600 at 50 and older.
Key takeaways
- A backdoor Roth is a nondeductible traditional IRA contribution followed by a conversion to a Roth IRA, which has no income limit.
- It fits high earners above the Roth income limits who have no other pre-tax IRA money or can move it into a 401(k).
- For 2026, each spouse can contribute $7,500, or $8,600 at 50 and older, so a couple under 50 can add $15,000 of Roth money.
- The catch is the pro-rata rule: other traditional, SEP, or SIMPLE IRA balances can make most of the conversion taxable.
The numbers
Picture a married couple, both under 50, whose income is too high to contribute to a Roth IRA directly. Each spouse makes a $7,500 nondeductible contribution and converts it.
For illustration purposes. Tax law may change, which may change these calculations slightly.
| Spouse one: nondeductible contribution, converted | $7,500 |
| Spouse two: nondeductible contribution, converted | $7,500 |
| New Roth money for 2026 | $15,000 |
If neither spouse has other pre-tax IRA money, the conversion is taxable only on any earnings between contribution and conversion, often close to $0.
The pro-rata trap
Now suppose spouse one also has $67,500 in an old pre-tax IRA. The IRS looks at all of that spouse’s traditional, SEP, and SIMPLE IRAs together, so each conversion is part after-tax and part pre-tax:
| Total IRA balance: $67,500 pre-tax + $7,500 after-tax | $75,000 |
| After-tax share: $7,500 ÷ $75,000 | 10% |
| Taxable part of a $7,500 conversion: 90% | $6,750 |
| Federal income tax on that amount (24% bracket) | about $1,620 |
The $6,750 is also generally included in Oklahoma taxable income. Spouse two, with no other IRA money, isn’t affected; the pro-rata rule applies to each person separately.
The usual fix is to roll the old pre-tax IRA into a 401(k), such as a Solo 401(k), before December 31 of the conversion year, if the plan accepts it. Then the backdoor conversion is clean.
Could this strategy work for your business?
In a free tax analysis, your tax strategist checks whether it fits and what it could save, using your real numbers.
How it works
- Contribute to a traditional IRA. Up to $7,500 for 2026 ($8,600 at 50 and older), and don’t deduct it.
- Convert it to a Roth IRA. Usually soon after, so little or no growth is taxed.
- File Form 8606. This form records the nondeductible contribution and shows the conversion isn’t taxed twice.
- Repeat each year. Contributions for a tax year can be made until that year’s filing deadline in April.
Who it fits
- High earners above the Roth income limits, single or married.
- Couples where one spouse doesn’t work. A spouse with no earnings can still contribute based on the working spouse’s income.
- Owners who have no other pre-tax IRA money, or can move it into a 401(k).
When it needs a closer look
- Anyone with traditional, SEP, or SIMPLE IRA balances. A SEP IRA from your business counts.
- Owners with no earned income for the year.
- People whose income is near the Roth limits, who may be able to contribute directly instead.
The rules
- Earned income required. You, or your spouse on a joint return, must have earned income at least equal to the contributions.
- No income limit on conversions. The Roth income limits apply to direct contributions only.
- Pro-rata rule. The taxable share of a conversion is figured using all of your traditional, SEP, and SIMPLE IRA balances as of December 31 of the conversion year.
- Five-year rule. Each conversion has its own five-year clock for the early-withdrawal penalty if you are under 59½.
Risks to weigh
- Missing Form 8606. Without it, the IRS may treat the conversion as fully taxable.
- A December surprise. Opening a SEP IRA or rolling a 401(k) into an IRA late in the year can pull a conversion into the pro-rata rule.
- No undo. Since 2018, Roth conversions can’t be reversed.
How we handle it for clients
With a Cannon & Brown tax plan, we check for pre-tax IRA balances that would trigger the pro-rata rule, plan the timing of contributions and conversions, and file Form 8606 correctly every year. Because our technology keeps your numbers current all year, we can test this strategy against your real numbers and adjust it as your business changes.
Illustrative example. The couple and figures on this page are hypothetical, used to explain how the strategy works. They are not a client and not a promise of results. The example assumes both spouses are under 50, have earned income, and are in the 24% federal bracket. This page is educational and is not tax advice for your situation; tax rules and limits change.
Brooks leads Cannon & Brown Tax Advisors, a forward-thinking tax firm serving business owners in Oklahoma and beyond. He builds year-round tax strategies that help business owners keep more of what they earn and reach their goals. More about Brooks
Common questions about the backdoor Roth IRA
Is a backdoor Roth IRA legal?
Yes. Anyone with earned income can make a nondeductible traditional IRA contribution, and the Roth income limits apply only to direct contributions, not conversions. You report it on Form 8606 each year.
Does a SEP IRA ruin a backdoor Roth?
It can. A SEP IRA from your business counts in the pro-rata rule along with traditional and SIMPLE IRAs, which can make most of the conversion taxable. The usual fix is to roll pre-tax IRA money into a 401(k), such as a Solo 401(k), before December 31 of the conversion year, if the plan accepts it.
Can my non-working spouse do a backdoor Roth?
Yes. A spouse with no earnings can still contribute based on the working spouse's income on a joint return. The pro-rata rule applies to each person separately.
Can I undo a Roth conversion if I change my mind?
No. Since 2018, Roth conversions can't be reversed, so it's worth checking for pre-tax IRA balances before you convert.
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