| Feature | Current rule (2026) |
|---|---|
| Income limit on this strategy | None; that is the point of it |
| Direct Roth contribution phase-out | Single: $153,000-$168,000 MAGI. Married filing jointly: $242,000-$252,000 MAGI |
| Non-deductible contribution limit | Same as the standard IRA limit: $7,500 ($8,600 at age 50 or older) |
| Pro-rata basis | Calculated across all Traditional, SEP, and SIMPLE IRAs combined |
| Best executed at | An online brokerage, then transferred to your self-directed Roth IRA |
How does the backdoor Roth strategy work?
There is no income limit on making a non-deductible contribution to a Traditional IRA, and no income limit on converting a Traditional IRA to Roth status. The backdoor Roth combines those two facts: contribute after-tax dollars to a Traditional IRA, then convert the balance to Roth. Because the contribution was never deducted, it is not taxed again at conversion. Any earnings that accumulate between the contribution and the conversion are taxable, so executing the two steps close together keeps the tax cost small.
What is the pro-rata rule, and why does it complicate the strategy?
The pro-rata rule doesn't ask which dollars you meant to convert; it treats every Traditional, SEP, and SIMPLE IRA you own as one combined account. If you have other pre-tax IRA money anywhere, that combined balance determines how much of your conversion is tax-free.
Here's a concrete example. You contribute $7,500 in non-deductible funds to a Traditional IRA, and you also hold $200,000 in pre-tax funds across other IRAs. Your combined IRA balance is $207,500, of which the $7,500 you just contributed is about 3.6 percent. When you convert that $7,500, only about 3.6 percent of it, roughly $270, comes out tax-free. The remaining $7,230 is taxed as ordinary income, even though your intention was to convert only the non-deductible portion.
When does a backdoor Roth make the most sense?
It works most cleanly when you have no other pre-tax IRA balances at all. In that case, the two steps carry minimal tax cost and you begin building Roth funds right away. If you do hold pre-tax IRA money, the strategy can still make sense, but the pro-rata math has to be run against your specific balances first. Some investors address this by rolling pre-tax IRA funds into an employer 401(k) or Solo 401(k), since 401(k) balances are not included in the pro-rata calculation, but whether that move fits your situation depends on your available plans and your broader tax picture.
Where should I execute a backdoor Roth?
A self-directed custodian like IRA Resources is built for holding alternative assets over time, with account and custody fees calibrated to that purpose. A backdoor Roth is pure cash mechanics, funded and converted within days, which is a better natural fit for an online brokerage built for exactly that kind of transaction.
The practical approach: complete the contribution and conversion at an online brokerage, then move the resulting Roth IRA to IRA Resources through a standard, non-taxable IRA-to-IRA transfer. Once it arrives, that balance can be self-directed into alternative assets the same as any other Roth IRA on the platform.
Should I talk to a professional before doing this?
Yes. A CPA or tax advisor familiar with the pro-rata rule and backdoor Roth mechanics should review your existing IRA balances, income trajectory, and state tax exposure before you contribute. The mechanics above explain what the strategy is; whether it produces a good outcome for your specific accounts is a calculation a professional needs to run.
Frequently Asked Questions
Does the backdoor Roth affect my Roth IRA's five-year clock?
Yes. The conversion step starts its own five-year clock for early withdrawal penalty purposes, the same as any other Roth conversion.
Can I do a backdoor Roth every year?
Yes. There is no limit on repeating the strategy annually, though the pro-rata calculation has to be run fresh each time against your IRA balances at that point.