What is the backdoor Roth IRA strategy?

The backdoor Roth is a strategy for high earners who exceed the Roth IRA income limits (the 2026 phase-out is $153,000 to $168,000 of modified AGI for single and head of household filers and $242,000 to $252,000 for married filing jointly, per IRS Notice 2025-67). The 2026 contribution limit is $7,500, or $8,600 if you're 50 or older. You make a non-deductible contribution to a traditional IRA, then immediately convert it to a Roth. If done cleanly, with no other traditional IRA money, the conversion is tax-free.

What is the IRS pro-rata rule?

The pro-rata rule (IRC § 408(d)(2)) requires you to treat all your traditional IRA money as a single pool when calculating the taxable portion of any Roth conversion. If you have $90,000 in a pre-tax rollover IRA and make a $7,500 after-tax contribution, your IRA pool is $97,500 and only 7.7% ($7,500/$97,500) of any conversion is tax-free. You cannot cherry-pick only the after-tax money.

How do I avoid the pro-rata problem?

The most effective solution is to roll your pre-tax IRA money into your current employer 401(k), if the plan accepts incoming rollovers. With no pre-tax IRA balance at year end, your after-tax contribution converts entirely tax-free. Check your plan documents first. Not every 401(k) accepts rollovers in.

Does the pro-rata rule apply to Roth 401(k) or Roth IRA balances?

No. Only traditional IRA balances (including rollover IRAs, SEP-IRAs, and SIMPLE IRAs) count in the pro-rata calculation. Roth IRAs, 401(k) accounts (traditional or Roth), and 403(b) accounts are not included. The calculation looks at your total traditional IRA value as of December 31 of the year you do the conversion.

What form do I use to report a backdoor Roth?

Form 8606 is filed with your tax return to report non-deductible IRA contributions and Roth conversions. Line 1 is this year's non-deductible contribution and line 2 your basis from earlier years; line 5 is your total basis. Line 6 is the December 31 value of all traditional, SEP and SIMPLE IRAs, line 7 other distributions, and line 8 the amount converted. Line 9 adds lines 6, 7 and 8, and line 10 divides line 5 by line 9. Line 11 is the tax-free part of the conversion, line 18 the taxable part, and line 14 the basis that carries forward.

Backdoor Roth IRA Pro-Rata Calculator

If you have any pre-tax money in a traditional or rollover IRA, the IRS pro-rata rule makes your Roth conversion partially taxable, even if you only contributed after-tax dollars. Calculate exactly how much of your conversion is taxable and what Form 8606 will show.

How this calculator works and the math behind it

The IRS pro-rata rule (IRC § 408(d)(2)) requires you to treat all your traditional IRA money as a single pool when calculating how much of a Roth conversion is taxable. If you have any pre-tax IRA money, you can't convert only the after-tax portion tax-free. The taxable and tax-free amounts are prorated across all accounts.

Dec 31 Balance of All Traditional, SEP and SIMPLE IRAs

Form 8606 line 6: the value on Dec 31 of the conversion year, after the conversion, including rollover, SEP and SIMPLE IRAs. Roth IRAs and 401(k)s don't count. Enter 0 if they're all empty.

Total Basis (Non-Deductible Contributions)

Form 8606 line 5: this year's nondeductible contribution plus the basis from last year's Form 8606 line 14.

Planned Conversion Amount

Form 8606 line 8: the total you convert to Roth this year.

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The pro-rata problem explained

Many high earners discover the backdoor Roth strategy and assume they can simply contribute $7,500 after-tax and convert $7,500 tax-free. This works perfectly if your total traditional IRA balance is $0 at year end. But if you have a rollover IRA from an old 401(k), the pro-rata rule applies.

Form 8606 figures the tax-free share as your basis divided by your December 31 IRA value plus this year\'s conversions and other distributions (line 5 / line 9). The rest is taxable. A $150,000 rollover IRA plus a new $7,500 after-tax contribution equals a $157,500 pool. Converting $7,500 produces a 95.2% taxable conversion: $7,143 of your $7,500 conversion is taxable at ordinary income rates. That is the opposite of what most people expect.

The calculation uses your IRA value on December 31 of the conversion year, not the balance on the day you convert. So the order within the year doesn't matter: pre-tax money rolled into a 401(k) by December 31 drops out of line 6 even if the conversion happened in February. A rollover into the 401(k) in January of the next year is too late.

Frequently asked questions

What is the backdoor Roth strategy?

Make a non-deductible traditional IRA contribution, then immediately convert to Roth. Designed for high earners over the direct Roth contribution income limit. Works cleanly only if you have no other pre-tax IRA money.

What is the pro-rata rule?

IRS rule (IRC § 408(d)(2)) that treats all your traditional IRA money as one pool. Tax-free % = basis / (December 31 IRA value + conversions + other distributions), per Form 8606 line 10. You cannot segregate after-tax contributions for tax-free conversion when you have pre-tax money.

How do I fix the pro-rata problem?

Roll your pre-tax IRA money into your current employer 401(k) before year end. With zero pre-tax IRA balance at December 31, your after-tax contribution converts entirely tax-free.

Which IRA accounts count in the pro-rata calculation?

All traditional IRAs, rollover IRAs, SEP-IRAs, and SIMPLE IRAs. Roth IRAs, 401(k)s, and 403(b)s do NOT count. Use the December 31 balance for the year of conversion.

What form reports a backdoor Roth?

Form 8606 filed with your tax return. Part I reports non-deductible contributions and works out the pro-rata ratio; Part II reports the conversion, with the taxable amount on line 18. Line 14 carries your remaining after-tax basis to next year.

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