Direct Roth IRA contributions are phased out for single filers with MAGI between $150,000 and $165,000, and for married couples filing jointly between $236,000 and $246,000 in 2026. Above those thresholds, you cannot contribute to a Roth IRA directly. But a workaround -- the "backdoor Roth" -- is fully legal and widely used by high-income earners.
The Two-Step Process
- Make a non-deductible contribution to a traditional IRA. Anyone with earned income can contribute regardless of income level. The 2026 limit is $7,500 ($8,600 if age 50 or older). Because you are over the income limit for both Roth contributions and deductible traditional IRA contributions, this contribution is non-deductible. File Form 8606 to record it -- this is critical for avoiding double taxation later.
- Convert the traditional IRA to a Roth IRA. Since you already paid tax on the contribution (it was non-deductible), only earnings that accumulated between contribution and conversion are taxable. If you convert quickly, earnings are minimal and the taxable amount is close to zero.
The Pro-Rata Rule: The Most Important Trap
The backdoor Roth works cleanly only if you have no pre-tax money in any traditional IRA (including SEP-IRA and SIMPLE IRA). If you do, the pro-rata rule makes the conversion partially taxable.
Example: You contribute $7,500 non-deductible. But you also have $67,500 in a pre-tax rollover IRA. Total IRA balance: $75,000. Pre-tax ratio: 90%. If you convert the $7,500, 90% of it ($6,750) is taxable -- even though you contributed after-tax dollars.
Solution: Roll existing pre-tax IRA funds into your current employer's 401(k) plan (if the plan accepts incoming rollovers) before executing the backdoor Roth. Once the pre-tax IRA is empty, the conversion is clean.
How to Report It
- Form 8606, Part I: Report your non-deductible contribution to establish your basis
- Form 8606, Part II: Report the Roth conversion and calculate the taxable amount
- You will receive a Form 1099-R from your IRA custodian showing the conversion
The most common mistake: skipping Form 8606 because you think "I already paid tax on it." Without Form 8606 on file, the IRS has no record of your basis and future distributions will appear fully taxable.
Source
IRS Publication 590-A (Contributions to Individual Retirement Arrangements); IRS Form 8606 instructions; IRS Notice 2014-54.