What Is a Backdoor Roth IRA and How It Works in 2026

By Ed Robinson, Co-Founder & Co-CEO, Stash · FINRA Series 7 & 63 · Graduate Diploma in Financial Planning · Last updated June 10, 2026

A backdoor Roth IRA is a way to fund a Roth IRA when your income is too high to contribute directly. The basic move is simple: put after-tax money into a Traditional IRA, then convert it to a Roth IRA. The tax math is where people get tripped up.

For 2026, direct Roth IRA contributions phase out from $153,000 to $168,000 of modified adjusted gross income for single filers and heads of household, and from $242,000 to $252,000 for married couples filing jointly. If your income is above those ranges, a backdoor Roth IRA may be worth understanding.

If you want the broader Roth IRA picture first, start with our Complete guide to Roth IRAs, then come back here for the backdoor details.

What is a backdoor Roth IRA?

A backdoor Roth IRA is not a special account. It is a funding strategy.

You make a nondeductible contribution to a Traditional IRA, then convert that money to a Roth IRA. People often use this approach when they earn too much to make a direct Roth IRA contribution.

The name sounds sneaky. It is not. Roth conversions have been allowed for higher-income taxpayers since 2010, and Congress has left the strategy in place. But allowed does not mean automatic. You still have to follow IRA contribution limits, conversion rules, tax reporting rules, and the pro-rata rule.

Here is the plain-English version:

• Roth IRA direct contributions have income limits.

• Roth conversions do not have the same income limits.

• A backdoor Roth IRA uses a Traditional IRA contribution plus a Roth conversion to get money into a Roth IRA.

For 2026, the IRA contribution limit is $7,500 if you are under age 50. If you are 50 or older, the limit is $8,600, including a $1,100 catch-up contribution. That limit is combined across all your Traditional IRAs and Roth IRAs. It also cannot exceed your taxable compensation for the year.

2026 backdoor Roth IRA limits at a glance

A backdoor Roth IRA does not create a separate contribution limit. It uses the regular IRA contribution limit.

Two important notes:

1. These limits apply per person, not per household. A married couple may each be able to use an IRA if each spouse has taxable compensation, or if they qualify under the spousal IRA rules.

2. The IRA limit is annual. If you already contributed to a Roth IRA for 2026, that amount counts against what you can contribute to a Traditional IRA for the same year.

How a backdoor Roth IRA works

A backdoor Roth IRA usually has three parts: contribute, convert, and report.

1. Contribute to a Traditional IRA

You contribute after-tax money to a Traditional IRA. For a backdoor Roth IRA, this is typically a nondeductible contribution. That means you are not taking a tax deduction for the contribution.

You must have taxable compensation for the year. Investment income by itself does not count as compensation for IRA contribution purposes.

2. Convert the money to a Roth IRA

Next, you convert the Traditional IRA money to a Roth IRA. A conversion is different from a contribution. That distinction matters because Roth conversions are not blocked by the Roth IRA income limits.

If the contribution earned money before you converted it, those earnings are generally taxable when converted. If you have other pre-tax IRA money, the pro-rata rule can make part of the conversion taxable too.

3. Report it on your taxes

You usually report the nondeductible IRA contribution on IRS Form 8606. This form tracks your after-tax IRA basis so you are not taxed twice on the same dollars.

You may also receive Form 1099-R from your IRA provider for the conversion and Form 5498 showing IRA contribution information. Do not ignore these forms. A backdoor Roth IRA done correctly can still look confusing at tax time if it is not reported correctly.

A simple backdoor Roth IRA example

Say you are 35, single, and your 2026 modified adjusted gross income is $175,000. That is above the 2026 Roth IRA direct contribution range for a single filer.

You contribute $7,500 to a Traditional IRA as a nondeductible contribution. Soon after, you convert the $7,500 to a Roth IRA.

If you have no other Traditional, SEP, or SIMPLE IRA balances and the contribution did not earn much before conversion, the additional tax bill from the conversion may be small.

But change one fact and the answer changes.

If you also have a $92,500 pre-tax rollover IRA from an old 401(k), the IRS does not let you convert only the after-tax $7,500 and pretend the pre-tax money is separate. Your IRA money is viewed as one combined bucket for tax purposes. That is the pro-rata rule.

The pro-rata rule, explained without tax jargon

Think of your IRAs like a glass of iced tea. Some of the glass is unsweetened tea, which represents after-tax money. Some is sweet tea, which represents pre-tax money. Once they are in the same glass, you cannot pour out only the unsweetened part.

That is how the pro-rata rule works.

The IRS looks at all your Traditional IRAs, SEP IRAs, and SIMPLE IRAs together when determining how much of your Roth conversion is taxable. It does not look only at the specific IRA you used for the backdoor Roth step.

Pro-rata example

Assume you have:

• $7,500 of nondeductible IRA basis from your 2026 contribution

• $92,500 of pre-tax Traditional IRA money

• $100,000 total IRA balance across Traditional, SEP, and SIMPLE IRAs

Your after-tax basis is 7.5% of the total IRA balance. If you convert $7,500, only about 7.5% of that conversion, or $562.50, would generally be treated as after-tax. The remaining $6,937.50 would generally be taxable.

That is why old rollover IRAs matter. A backdoor Roth IRA can still be possible, but it may not be as clean as it looks in a two-step diagram.

Why higher earners use a backdoor Roth IRA

The main reason is access. If your income is above the Roth IRA direct-contribution limit, a backdoor Roth IRA may let you add money to a Roth IRA through the conversion rules.

Roth IRAs can be useful because qualified withdrawals are generally not taxed or penalized. Roth IRAs also do not have required minimum distributions during the original owner's lifetime. That can give you more flexibility later.

But a backdoor Roth IRA is not a loophole that makes taxes disappear. It is a tax-sensitive strategy. If the pro-rata rule applies, or if you convert a large pre-tax IRA balance, the tax bill can be meaningful.

Stash's point of view: tools are not the plan. The plan is investing consistently, staying diversified, keeping a long-term mindset, and not letting tax jargon scare you away from learning. You do not need a finance degree to understand your options. You do need clear information before you move money.

Backdoor Roth IRA timing rules for 2026

Timing is one of the most common places people make mistakes.

• 2026 IRA contribution deadline: You can generally make a 2026 IRA contribution until the federal tax filing deadline in April 2027.

• Conversion year: A Roth conversion is reported for the calendar year in which the conversion happens.

• Contribution year and conversion year can differ: You could make a 2026 Traditional IRA contribution in early 2027, then convert in 2027. The contribution and conversion may show up on different years of tax paperwork.

• No annual limit on conversions: The IRA contribution limit caps contributions, not conversions. But converting pre-tax money can create taxable income.

This is why recordkeeping matters. The IRS cares about what tax year the contribution was for, when the conversion happened, and how much after-tax basis you had.

What to keep in mind before doing one

Before using a backdoor Roth IRA, slow down and check these items.

• Taxable compensation: You need taxable compensation to make an IRA contribution.

• Combined IRA limit: The 2026 limit is $7,500 under age 50 or $8,600 if you are 50 or older, across Traditional and Roth IRAs combined.

• Direct Roth contributions already made: If you already contributed directly to a Roth IRA for 2026, that reduces what you can contribute to a Traditional IRA for 2026.

• Pro-rata rule: Traditional, SEP, and SIMPLE IRA balances can make part of the conversion taxable.

• Form 8606: This form is central for tracking nondeductible IRA contributions.

• Earnings before conversion: Any investment gains before the conversion are generally taxable when converted.

• 5-year rules: Roth IRA withdrawal rules can affect whether taxes or penalties apply later.

• Excess contributions: IRA excess contributions can trigger a 6% excise tax each year they remain uncorrected.

• RMDs: Traditional IRA required minimum distributions generally begin at age 73 for many people now, and age 75 for people born in 1960 or later. Roth IRAs do not have lifetime RMDs for the original owner.

For more detail on the tax and timing side, read Roth conversion explained and What Is a Roth IRA?. If you are still choosing an account, our guide on The Stash Way: Invest Regularly can help with the basics.

Common backdoor Roth IRA mistakes

A backdoor Roth IRA is simple in concept, but easy to mishandle. Watch for these common mistakes.

Mistake 1: Forgetting about an old rollover IRA

An old rollover IRA from a past employer can trigger the pro-rata rule. Many people do not realize that an IRA at another provider still counts.

Mistake 2: Taking a deduction for the Traditional IRA contribution

A backdoor Roth IRA usually starts with a nondeductible Traditional IRA contribution. If you deduct the contribution and then convert it, you may create a different tax result than expected.

Mistake 3: Skipping Form 8606

Form 8606 tells the IRS you made a nondeductible contribution and helps track your basis. Missing it can create tax confusion later.

Mistake 4: Contributing too much

The IRA contribution limit applies across Roth and Traditional IRAs combined. Contributing $7,500 to a Roth IRA and another $7,500 to a Traditional IRA for the same year would generally be an excess contribution if you are under 50.

Mistake 5: Thinking conversion means immediate withdrawal access

Roth IRA withdrawals have ordering rules and 5-year rules. Contributions, conversions, and earnings are not all treated the same. Review Stash Learn before taking money out.

When a backdoor Roth IRA may make sense

A backdoor Roth IRA may be worth exploring if:

• Your income is too high for a direct Roth IRA contribution.

• You have taxable compensation.

• You have little or no pre-tax money in Traditional, SEP, or SIMPLE IRAs.

• You are already covering near-term cash needs and high-priority debts.

• You are investing for the long term and understand the tax reporting.

When to be extra careful

Be careful if:

• You have a large pre-tax IRA balance.

• You have a SEP IRA or SIMPLE IRA.

• You are close to retirement and may need the money soon.

• You are unsure whether your Traditional IRA contribution is deductible or nondeductible.

• You already made IRA contributions for the year.

• Your tax situation is changing because of a bonus, business income, marriage, divorce, or moving states.

This is not a place to wing it. A quick conversation with a qualified tax professional can be cheaper than fixing a preventable mistake.

Follow the Stash Way

A backdoor Roth IRA is one tool, not a whole plan.

The Stash Way is about investing regularly, thinking long term, diversifying, and keeping enough cash for near-term needs. That is not flashy. It is also not built around hot tips or day-trading culture. We think most people are better served by a long-term plan than by chasing whatever financial hack is trending this week.

Stash is a regulated investment adviser, not a bank, with plans starting at $3 a month for financial guidance built into your phone. Think of it as a financial advisor in your pocket, made for people who want help understanding the next right step.

This article is general education. What is right for you depends on your full financial picture. Investing involves risk, including the risk that you could lose money.

Bottom line

A backdoor Roth IRA can help some higher-income earners fund a Roth IRA through a Traditional IRA contribution and Roth conversion. For 2026, watch the $7,500 IRA contribution limit, the $8,600 limit if you are 50 or older, the taxable compensation rule, Form 8606, and the pro-rata rule.

The strategy can be useful, but the tax details decide whether it fits. Learn the rules first. Then decide with your full financial picture in view.

Important disclosures

This article is general education, not personalized recommendations or tax advice. Stash is a regulated investment adviser providing financial guidance, not a bank. Roth IRA rules can change, and taxes depend on your full financial picture. Consider speaking with a qualified tax professional before using a backdoor Roth IRA strategy.

• Investing involves risk, including the possible loss of principal. Past performance is not a guarantee of future results.

• Stash is not a bank. Banking services are provided by a partner bank, and FDIC insurance is provided through that partner bank.

• Stash does not provide tax or legal guidance. Consult a qualified tax or legal professional about your own circumstances.

• This material is for informational and educational purposes only and does not constitute investment, legal, accounting, or tax advice. The information reflects market conditions as of publication and may change without notice. Stash makes no guarantees regarding accuracy or future performance. Investing involves risk, including possible loss of principal. Examples are for illustrative purposes only and not recommendations to buy or sell any security or strategy. Past performance does not guarantee future results. For full disclosures, visit www.stash.com/disclosures.