Two steps, one goal
Non-deductible contribution, then conversion.
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Retirement accounts0/9
401(k) basics: don’t leave free money behindIRAs: your own retirement accountRoth vs. Traditional IRA: which is right for you?The backdoor Roth IRAThe HSA: the most tax-friendly account you're not usingSocial Security: when to claimThe 4% rule and safe withdrawalsRequired minimum distributions (RMDs)Early withdrawals and the 72(t) exception
The backdoor Roth IRA
A two-step route to a Roth IRA for people above the income limit — with a pro-rata rule that trips many up.
In this lesson you will
- Describe the two backdoor steps
- Explain the pro-rata rule
- Know when to get professional help
Direct Roth IRA contributions phase out at higher incomes. The “backdoor” Roth is a widely used two-step process for people above that limit: contribute to a traditional IRA without deducting it, then convert it to a Roth IRA.
The two steps
- Make a non-deductible contribution to a traditional IRA (reported on IRS Form 8606).
- Convert that money to a Roth IRA.
The pro-rata rule
If you already have pre-tax money in any traditional, SEP or SIMPLE IRA, the IRS treats a conversion as coming proportionally from pre-tax and after-tax money across all of them. Part of the conversion can then be taxable, even if you only meant to convert the new contribution.
Why it matters
People with large pre-tax IRA balances may owe unexpected tax on a backdoor conversion. Some first move pre-tax IRA money into a workplace plan, if the plan allows, but this needs care.
Get help
Because the reporting is specific and mistakes are costly, many people use a tax professional for their first backdoor Roth. Not tax advice — rules and limits change; check IRS guidance or a tax professional.
By the GetGuac team · Editorial policy
Three ideas to keep
All IRAs count together
For the pro-rata rule.
Form 8606 matters
It tracks after-tax money.
Do it in 4 steps
Confirm you are over the Roth limit
Using current IRS figures.
Check existing pre-tax IRA balances
All traditional, SEP and SIMPLE IRAs.
Model the tax
Before converting.
File Form 8606
Or have a professional do it.
The pro-rata rule in numbers
Illustrative: $6,000 new after-tax contribution and $54,000 existing pre-tax IRA money; $6,000 converted.
| Item | Amount |
|---|---|
| Total IRA money | $60,000 |
| After-tax share | 10% ($6,000 ÷ $60,000) |
| Of the $6,000 converted, tax-free | $600 |
| Of the $6,000 converted, taxable | $5,400 |
With no other pre-tax IRA money, almost all of the conversion would have been tax-free.
Where this usually goes wrong
- Ignoring other pre-tax IRAs
- Forgetting Form 8606
- Assuming the backdoor is always tax-free
Add up all your pre-tax traditional, SEP and SIMPLE IRA balances.
Tools and guides for this lesson
Quick quiz
1. The backdoor Roth is mainly used by…
2. The pro-rata rule looks at…
3. Which IRS form tracks non-deductible contributions?
0 of 3 answered
Puzzle
You have $20,000 pre-tax IRA money and add $5,000 after-tax. You convert $5,000. How much is taxable?
Show the answer
$4,000
After-tax share: $5,000 ÷ $25,000 = 20%. Taxable: 80% × $5,000 = $4,000.