A backdoor Roth IRA is not a loophole – it is a two-step process the IRS has explicitly permitted since Congress removed the income cap on Roth conversions in 2010 (Tax Increase Prevention and Reconciliation Act of 2005, effective tax years starting 2010). Step one: contribute to a Traditional IRA. There is no income limit on making a nondeductible Traditional IRA contribution, only on deducting it. Step two: convert that Traditional IRA balance to a Roth IRA, which also has no income limit.

For 2026, the IRA contribution limit is $7,500 ($8,600 if you are 50 or older, per IRS Notice 2025-67). Direct Roth IRA contributions phase out for single filers between $153,000 and $168,000 of modified adjusted gross income, and for married couples filing jointly between $242,000 and $252,000 – above those thresholds, the backdoor route is the only way to fund a Roth with new contributions.

The step most people get wrong: the IRS “pro-rata rule” under IRC Section 408(d)(2) requires you to aggregate all your Traditional, SEP, and SIMPLE IRA balances when figuring the taxable portion of any conversion. If you have old pre-tax IRA money sitting around, part of your “backdoor” conversion will be taxable. You report the nondeductible contribution and the conversion on IRS Form 8606 each year – skipping this form is the most common paperwork mistake, and it can cause you to pay tax twice on the same money down the road.

FAQ

Is the backdoor Roth IRA legal? Yes. It uses two individually legal transactions – a nondeductible contribution and a conversion – that the IRS has never challenged as a strategy when done correctly and reported on Form 8606.

Do I owe taxes on the conversion? Only on any pre-tax earnings or pre-tax IRA balances included in the conversion, calculated under the pro-rata rule.