The Step-by-Step Process for Converting Money Into a Backdoor Roth

What happens in a backdoor Roth conversion

A backdoor Roth works in four steps: you put after-tax money into a Traditional IRA, wait a few days, convert that money to a Roth IRA, and then file a form with your tax return to report what you did. The IRS allows this because you are moving money you already paid income tax on, so the Roth receives it tax-free and your future withdrawals stay tax-free.

The whole process takes about two weeks from start to finish if your brokerage moves quickly. You do not need permission from the IRS beforehand. You do need to file Form 8606 with your tax return the year you convert, and you must do the conversion in the same calendar year you make the contribution — you cannot contribute in December and convert in January of the next year.

The reason people do this: if your income is too high to contribute directly to a Roth IRA, a backdoor Roth lets you put money in anyway. The income limits for direct Roth contributions change each year, but a backdoor Roth has no income limit.

Key Takeaways

You contribute after-tax money to a Traditional IRA, wait several business days, then convert it to a Roth IRA in the same calendar year.
You must file Form 8606 with your tax return to report the conversion, even if you owe no tax on it.
If you have other pre-tax IRA money (from a SEP-IRA, straightforward IRA, or a previous rollover), the pro-rata rule may force you to pay tax on part of the conversion.
The conversion itself is free, but your brokerage may charge a small fee to move money between accounts.
You can do a backdoor Roth every calendar year as long as your income is above the direct Roth limit.

Step 1: Contribute after-tax money to a Traditional IRA

Open or use an existing Traditional IRA at your brokerage — the same place where your Roth IRA sits, or a different one. You can use Fidelity, Vanguard, Charles Schwab, or most other brokerages that hold IRAs.

Deposit the amount you want to convert. For 2024, the IRA contribution limit is $7,000 per person ($8,000 if you are 50 or older). You can contribute up to that amount, but you do not have to contribute the full limit. Some people contribute $1,000, others $7,000 — the choice is yours.

Make sure you are contributing to a Traditional IRA, not a Roth IRA. The money goes in after-tax, meaning you have already paid income tax on it (or you will claim it as non-deductible on your tax return). Do not deduct this contribution on your tax return — that is the whole point of the backdoor method.

Step 2: Wait for the money to settle

After you deposit the money, wait at least a few business days before converting. This gives your brokerage time to process the deposit and settle the funds. Most brokerages settle contributions within one to three business days, but checking with your specific brokerage removes guesswork.

You do not need to wait a full month or quarter. A few business days is enough. The IRS does not require a waiting period, but brokerages do for their own accounting purposes.

Step 3: Convert the Traditional IRA to a Roth IRA

Once the money has settled, log into your brokerage account and look for a "convert" or "rollover" option. Most brokerages have this in the IRA section of their website. You will select the Traditional IRA account, choose the amount to convert (usually all of it), and select the Roth IRA as the destination account.

The brokerage will process the conversion, which typically takes one to five business days. During this time, the money moves from your Traditional IRA to your Roth IRA. You may see it briefly disappear from the Traditional account before it shows up in the Roth.

Some brokerages charge a small fee for this conversion — usually $0 to $50 depending on the firm. A few charge nothing. Check your brokerage's fee schedule before you convert, or call their customer service to ask.

Step 4: File Form 8606 with your tax return

When you file your tax return for the year you converted, you must include Form 8606: Nondeductible IRAs. This form tells the IRS that you converted after-tax money from a Traditional IRA to a Roth IRA.

Form 8606 has several parts. Part I asks about nondeductible contributions you made to any Traditional IRA that year. Part II asks about conversions. You will fill in the amount you converted and report it to the IRS. If you used tax software like TurboTax or H&R Block, the software will walk you through these questions and generate the form for you.

If you do not file Form 8606, the IRS may assess a penalty of $50 per form (though the IRS can waive this if you have a good reason). More importantly, without the form, the IRS has no record that you reported the conversion, which can create problems if you are ever audited.

What the pro-rata rule means and when it affects you

The pro-rata rule is the biggest trap in a backdoor Roth. If you have any pre-tax money sitting in any Traditional IRA, SEP-IRA, or straightforward IRA — even money you are not converting — the IRS treats all your IRAs as one pool for tax purposes. When you convert, you must pay tax on a portion of the conversion based on how much pre-tax money you have total.

Here is an example: suppose you have $50,000 in a Traditional IRA from a previous rollover (pre-tax money) and you contribute and convert $7,000 of after-tax money. The IRS sees $57,000 total in your IRA accounts. Of that, $50,000 is pre-tax and $7,000 is after-tax. The ratio is roughly 88% pre-tax. When you convert the $7,000, you owe tax on 88% of it — about $6,160 — even though you are only converting the after-tax portion.

If you have no pre-tax IRA money anywhere, the pro-rata rule does not explore and you owe no tax on the conversion. If you do have pre-tax money, you have a few options: roll the pre-tax IRA into your employer 401(k) plan (if your plan allows it), wait to do the backdoor Roth until after you have moved the pre-tax money out, or accept the tax bill and convert anyway.

Common mistakes to avoid

The most common mistake is contributing to a Roth IRA directly instead of a Traditional IRA first. If you are over the income limit for direct Roth contributions, you cannot put money directly into a Roth. You must go through the Traditional IRA step first. Putting money straight into a Roth when you are ineligible can trigger a penalty.

Another mistake is deducting the Traditional IRA contribution on your tax return. If you deduct it, the IRS sees the money as pre-tax, and you will owe tax on the conversion. You want the contribution to be non-deductible, which means you do not claim it as a deduction. Most people filing a backdoor Roth have high income and cannot deduct Traditional IRA contributions anyway, so this usually happens by default — but double-check your tax software to make sure.

A third mistake is converting in a different calendar year than you contributed. If you contribute in December 2024 and convert in January 2025, the IRS treats them as separate transactions in separate years. Contribute and convert in the same calendar year to keep things clean.

Finally, some people forget to file Form 8606 or file it incorrectly. Without the form, you have no proof you reported the conversion. Keep a copy of Form 8606 with your tax records, and if you use a tax preparer, make sure they know you did a backdoor Roth so they include the form.

Frequently Asked Questions

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

Yes. A 401(k) does not affect the backdoor Roth process. The pro-rata rule only looks at IRAs (Traditional, SEP, and straightforward), not 401(k)s. If your only retirement account is a 401(k), you can do a backdoor Roth without any tax complications.

What if my brokerage does not let me convert online?

Call your brokerage's customer service line and ask them to process a conversion from your Traditional IRA to your Roth IRA. They can do it over the phone. Some smaller brokerages require a phone call or a paper form, but all brokerages that hold IRAs can process conversions.

Do I have to convert the entire Traditional IRA balance?

No. You can convert part of it and leave the rest in the Traditional IRA. However, if you have pre-tax money in that Traditional IRA, the pro-rata rule applies to whatever amount you convert, based on your total IRA balance. Converting $3,000 instead of $7,000 does not avoid the pro-rata rule — it just reduces the dollar amount of tax you owe.

Can I do a backdoor Roth for my spouse?

Yes, if your spouse has earned income that year. Your spouse would follow the same four steps using their own Traditional IRA and Roth IRA. Each person files their own Form 8606. If your spouse has no earned income, they cannot contribute to an IRA that year, so a backdoor Roth is not an option for them.

What happens if I convert and then the market drops?

You still owe tax on the full amount you converted, even if the value drops afterward. The tax is based on the value on the day you convert. If you convert $7,000 and the market drops so it is worth $6,000 a week later, you still owe tax on $7,000. Some people do a "recharacterization" (moving the money back to a Traditional IRA) if the market drops significantly right after conversion, but recharacterization rules are strict and change year to year — consult a tax professional before attempting this.

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.