Step-by-Step: How to Execute a Backdoor Roth Conversion

What a backdoor Roth conversion is and why you'd do one

A backdoor Roth conversion is a way to move money into a Roth IRA when your income is too high to contribute directly. You put after-tax money into a Traditional IRA, then convert it to a Roth IRA. The converted money grows tax-free in the Roth, and you can withdraw it tax-free in retirement.

The reason people do this: the IRS sets income limits on direct Roth contributions. In 2024, if you earn above a certain threshold (which varies by filing status), you cannot contribute to a Roth at all. A backdoor conversion bypasses that limit. You are not putting in more money than the annual limit allows — you are just using a different route to get it there.

The mechanics are straightforward, but the tax consequences depend on whether you already have other Traditional IRAs. That is the part that trips people up, and it is covered in the section below.

Key Takeaways

A backdoor Roth involves contributing to a Traditional IRA and then converting it to a Roth IRA, which bypasses income limits on direct Roth contributions.
You can only convert the amount that matches the annual contribution limit (currently $7,000 for those under 50, $8,000 for those 50 and older), not unlimited amounts.
If you have other Traditional, SEP, or straightforward IRAs with pre-tax money in them, the conversion triggers a pro-rata tax calculation that may result in a large tax bill.
The conversion itself happens at your brokerage; you instruct them to convert the Traditional IRA to a Roth IRA, and you report it on your tax return using Form 8606.
Timing matters: you must complete the conversion in the same calendar year as the contribution, and you report both on the same tax return.

Step 1: Contribute to a Traditional IRA

Open a Traditional IRA at your brokerage if you do not already have one. This can be the same brokerage where you hold your Roth, or a different one — it does not matter. Fidelity, Vanguard, Charles Schwab, and most other brokerages offer Traditional IRAs.

Contribute the amount you want to convert. For 2024, the limit is $7,000 if you are under 50, or $8,000 if you are 50 or older. You can contribute this amount even if your income is too high for a direct Roth contribution. The key is that you are contributing with after-tax dollars — money you have already paid income tax on. Do not deduct this contribution on your tax return.

You can make this contribution any time during the calendar year or up to the tax filing important date of the following year (usually April 15). Many people do it early in the year to give the money more time to grow before conversion.

Step 2: Wait a few days, then convert to a Roth IRA

After the money settles in the Traditional IRA (usually one to three business days), contact your brokerage and request a conversion to a Roth IRA. You can do this online, by phone, or by mail, depending on the brokerage. Some brokerages call it a "Roth conversion," others call it a "rollover to Roth." The terminology varies, but the action is the same.

You can convert the full amount you just contributed, or you can convert it in pieces over time. Most people convert the whole amount at once to keep things straightforward. The brokerage will handle the mechanics — you do not need to move the money yourself.

The conversion happens in the same calendar year as the contribution. If you contribute in January and convert in February, both events are in the same tax year. If you contribute in April 2024 and convert in May 2024, same thing. This timing matters for your tax return.

The pro-rata rule: when a conversion costs you in taxes

Here is the catch: if you have any other Traditional, SEP, or straightforward IRAs with pre-tax money in them, the IRS treats all your IRAs as one pool for tax purposes. When you convert, you cannot cherry-pick only the after-tax money. Instead, the IRS calculates what percentage of your total IRA balance is pre-tax, and that percentage of your conversion is taxable.

Example: You have a Traditional IRA with $90,000 in pre-tax contributions (from a previous rollover or deduction). You contribute $7,000 in after-tax money and convert it. Your total IRA balance is now $97,000. The IRS says 90,000 ÷ 97,000 = 92.8% of your IRAs is pre-tax. So 92.8% of your $7,000 conversion ($6,496) is taxable income in the year of conversion. You owe income tax on that amount.

This is called the pro-rata rule, and it applies even if the pre-tax money is in a different IRA at a different brokerage. The IRS does not care where the money sits — it counts all your IRAs together. If you have no other IRAs, or only Roth IRAs, the pro-rata rule does not explore and your entire conversion is tax-free.

If you have pre-tax IRAs and want to do a backdoor Roth, you have one option: roll the pre-tax IRA balance into your employer's 401(k) plan, if your plan allows it. This removes the pre-tax money from the IRA pool, so the pro-rata rule no longer applies to your conversion. Not all plans allow this, so check with your plan administrator first.

Step 3: Report the conversion on your tax return

When you file your tax return for the year of the conversion, you will report it using Form 8606 (Nondeductible IRAs). This form tells the IRS that you contributed after-tax money to a Traditional IRA and converted it to a Roth.

On Form 8606, you report the amount you contributed, the amount you converted, and the amount of that conversion that is taxable (if any). If the pro-rata rule applies, you calculate the taxable portion on this form. If you have no other IRAs, the taxable portion is zero.

Your brokerage will send you a Form 1099-R in January of the following year, showing the conversion amount. Attach this to your tax return along with Form 8606. If you do the conversion yourself without filing Form 8606, the IRS may treat the entire conversion as taxable, even though part of it was after-tax money. Filing the form protects you.

What happens after the conversion is complete

Once the conversion is done and reported on your tax return, the money is in your Roth IRA. From that point forward, it grows tax-free. You do not owe taxes on the growth, and you do not owe taxes when you withdraw it in retirement (as long as you follow the Roth withdrawal rules).

You can do a backdoor Roth conversion every year, as long as your income is above the direct contribution limit. Each year you follow the same steps: contribute to a Traditional IRA, convert to a Roth, and report on Form 8606. Over time, this builds up a substantial Roth balance that you control.

One note: if you convert in one year but do not file your tax return until the next year, you still report the conversion on the return for the year it happened. The filing important date does not change when the conversion happened — only the year of the conversion matters.

Common mistakes to avoid

The most common mistake is not checking for other IRAs before converting. People forget about an old SEP IRA from a previous job, or a rollover IRA they opened years ago. The pro-rata rule catches them, and they end up with a surprise tax bill. Before you convert, list every IRA you own, including old ones you do not use.

Another mistake is deducting the Traditional IRA contribution on your tax return. If you deduct it, the IRS treats the entire amount as pre-tax, and the whole conversion becomes taxable. You must not deduct the contribution. If you already deducted it, you can file an amended return to correct it.

A third mistake is converting in one year but not reporting it on that year's tax return. The brokerage sends a 1099-R, and the IRS sees the conversion. If you do not file Form 8606 to explain that part of it was after-tax, the IRS assumes the entire amount is taxable. Always file Form 8606 in the year of the conversion.

Frequently Asked Questions

Can I do a backdoor Roth if I have a 401(k) at work?

Yes. A 401(k) does not count toward the pro-rata rule — only IRAs do. You can have a 401(k) and still do a backdoor Roth without triggering the pro-rata rule. The only time a 401(k) matters is if you want to roll a pre-tax IRA into it to avoid the pro-rata rule.

What if I convert but the market drops before I file my taxes?

You can undo a conversion by filing an amended return and requesting a "recharacterization" — but only if your brokerage allows it. Many brokerages stopped offering recharacterizations after 2017, so check your brokerage's policy. If you cannot recharacterize, you are stuck with the conversion as it happened, regardless of market changes.

Do I have to convert the entire Traditional IRA contribution, or can I convert part of it?

You can convert part of it, but the pro-rata rule still applies to the part you do convert. If you have pre-tax IRAs, converting only half the money does not help — the pro-rata calculation still includes all your IRAs. You might as well convert the whole amount.

What if I contribute to the Traditional IRA but forget to convert it?

The money stays in the Traditional IRA and grows tax-deferred, but you have not achieved the goal of a backdoor Roth. You can convert it later, but the pro-rata rule will explore based on the balance at the time of conversion. It is better to convert in the same year as the contribution to keep things straightforward.

Can my spouse do a backdoor Roth if I have pre-tax IRAs?

No. The pro-rata rule applies to each person separately. Your spouse's IRAs are not counted in your pro-rata calculation, and yours are not counted in theirs. If your spouse has no pre-tax IRAs, they can do a backdoor Roth without triggering the rule, even if you have pre-tax IRAs.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.