Backdoor Roth IRAs: Everything you need to know

M1 Team
M1 Team August 11, 2026

A backdoor Roth IRA is a legal, two-step strategy that lets high earners who exceed the Roth IRA income limits still fund a Roth: you make a non-deductible contribution to a traditional IRA, then convert it to a Roth IRA. Roth conversions have no income limit — but tax rules, especially the pro-rata rule, determine how much you may owe. 

What is a backdoor Roth IRA? 

A Roth IRA is a retirement account you fund with after-tax dollars; qualified withdrawals in retirement are generally tax-free. The catch is that the IRS caps who can contribute directly: once your modified adjusted gross income (MAGI) rises above the annual limit, you can no longer put money into a Roth the ordinary way. 

A backdoor Roth IRA is a workaround for that limit. Because a Roth conversion has no income cap, higher earners can contribute to a traditional IRA first and then convert those funds to a Roth. It is not a separate type of account — it is a sequence of two ordinary transactions that, together, get after-tax money into a Roth. 

Who is a backdoor Roth IRA for? 

A backdoor Roth is generally aimed at investors whose income exceeds the Roth contribution limits. For 2026, the ability to contribute directly to a Roth phases out over these MAGI ranges, per IRS Publication 590-A: 

  • Single / head of household: $153,000 – $168,000 
  • Married filing jointly: $242,000 – $252,000 
  • Married filing separately (if you lived with your spouse): $0 – $10,000 — this range is not adjusted for inflation, so most filers in this status are locked out of direct Roth contributions entirely. 

Above the top of your range, you generally cannot contribute to a Roth directly — the point at which some investors consider the backdoor approach. It is not right for everyone: if the conversion would push you into a higher marginal bracket and you cannot comfortably cover the resulting tax bill, it may not make sense. Because it depends on your income, existing IRA balances, and tax situation, consider discussing it with a qualified tax professional first. 

Backdoor Roth IRA rules 

A few rules govern the strategy: 

  • Contribution limits still apply to the first step. For 2026 you can contribute up to $7,500 across all your IRAs combined ($8,600 if you’re 50 or older), per the IRS. The backdoor doesn’t raise that limit — it only removes the income barrier to getting those dollars into a Roth. 
  • Conversions have no income limit. The Roth MAGI limits apply to direct contributions, not to conversions — which is what makes the strategy work. 
  • A conversion generally can’t be undone. The Tax Cuts and Jobs Act of 2017 eliminated re-characterization of Roth conversions (per the IRS), so treat the decision as final. 
  • RMDs interact with conversions. You cannot convert a required minimum distribution. RMDs generally begin at age 73 (rising to 75 for those born in 1960 or later). Roth IRAs have no RMDs during the original owner’s lifetime — one reason some investors value them. 
  • The 60-day rule applies to indirect rollovers. If funds are paid to you rather than moved trustee-to-trustee, you generally have 60 days to complete the rollover or the distribution may be taxable and, if you’re under 59½, subject to a 10% penalty. A trustee-to-trustee transfer avoids that risk. 

The pro-rata rule — the biggest backdoor Roth pitfall 

The pro-rata rule is where many backdoor Roth conversions go sideways, so it’s worth understanding before you start. The IRS treats all of your traditional, SEP, and SIMPLE IRAs as one combined account when calculating the taxable portion of a conversion. You cannot simply convert only your new after-tax contribution and leave pre-tax balances untouched. 

In practice, if you already hold pre-tax (deductible) money in any IRA, a conversion is taxed proportionally across your after-tax and pre-tax dollars — so part of the conversion may be taxable even though your new contribution was after-tax. As a hypothetical illustration: if you held $92,500 of pre-tax money across your IRAs and added a $7,500 non-deductible contribution (the 2026 limit), your combined IRA balance would be $100,000, of which 92.5% is pre-tax. That ratio is what applies, not the dollar amounts: 92.5% of whatever you convert is taxable, so converting the $7,500 would leave roughly $6,938 taxable. The IRS does not let you isolate the after-tax slice on its own. 

That’s why investors with large pre-tax IRA balances may find the backdoor generates more tax than expected. The pro-rata calculation counts only IRA balances — pre-tax money held in an employer plan such as a 401(k) is not included. Whether a plan accepts roll-ins of existing IRA balances varies by plan, and the tax treatment of any such transfer depends on individual circumstances. 

How to do a backdoor Roth IRA: step by step

  1. Fund a traditional IRA

    Fund with a non-deductible contribution (up to the annual limit above)

  2. Convert to a Roth IRA.

    A common method is a trustee-to-trustee (or same-trustee) transfer, which avoids the 60-day rule that applies when funds are paid to you.

  3. Report it on IRS Form 8606

    This tracks your non-deductible basis so you aren’t taxed twice on the after-tax portion.

  4. Pay any tax due on pre-tax amounts converted, applying the pro-rata rule.

    Both your pre-tax and after-tax dollars end up in the Roth — the pre-tax portion is simply taxed on the way in, while your after-tax (non-deductible) contribution is not taxed again.

What is a mega backdoor Roth? 

A mega backdoor Roth is a separate, higher-capacity strategy that works through a workplace 401(k) rather than an IRA. If your plan allows after-tax contributions above the regular employee deferral limit and permits either in-plan Roth conversions or in-service withdrawals, you may be able to move those after-tax dollars into a Roth — potentially far more than the IRA backdoor allows in a year. 

It is entirely plan-dependent: many 401(k) plans don’t offer after-tax contributions or in-service conversions, so the mega backdoor simply isn’t available to everyone. The mechanics and tax reporting are more complex than the standard backdoor, and the same pro-rata considerations can apply. Confirm what your plan allows with your plan administrator, and consider reviewing the tax treatment with a professional before you start. 

Factors that may favor or weigh against a backdoor Roth 

Whether a backdoor Roth fits depends on individual tax circumstances, existing IRA balances, and timeline. Factors commonly weighed on each side: 

Factors that may favor a conversion 

  • A year when your tax rate is lower than usual, such as after a job change or a lower-income year. 
  • A market decline that has temporarily reduced the traditional IRA balance being converted. 
  • Converting early in the tax year, which leaves until the following April’s filing deadline to pay the resulting tax. 
  • Converting in stages across multiple years, which spreads the tax impact rather than concentrating it in one. 

Factors that may weigh against one 

  • A conversion large enough to move you into a higher marginal tax bracket. 
  • No cash available outside the account to cover the tax due on the conversion. 
  • Needing the money within five years — withdrawals of converted amounts before then can trigger taxes and a 10% penalty. 
  • A large pre-tax IRA balance, which increases the taxable share of any conversion under the pro-rata rule. 

These are factors to weigh, not recommendations. Whether a conversion is appropriate depends on individual circumstances, and a tax professional can review the specifics. 

Backdoor Roth IRA Tax implications 

When you convert, any pre-tax money you move is added to your taxable income for that year and taxed at your ordinary income rate. Non-deductible contributions you already made are not taxed again, because they never received a deduction. 

If the conversion is done correctly, the 10% early-withdrawal penalty generally does not apply. You cannot convert RMDs, and the pro-rata rule governs how much of a conversion is taxable. There may be other tax implications specific to your situation — M1 does not provide tax advice, so consult your own tax professional. 

Doing a backdoor Roth IRA conversion with M1 

M1 offers both traditional and Roth IRAs, so the traditional IRA you contribute to and the Roth you convert into can live on one platform. Once you set your target allocation, M1 automatically directs your deposits toward it, and dividends can be reinvested automatically. 

A platform fee and other fees may apply; review the current M1 Fee Schedule before you decide. 

Frequently asked questions about Backdoor Roth IRAs

Is a backdoor Roth IRA legal?

Yes. The backdoor Roth uses two legal transactions — a non-deductible traditional IRA contribution followed by a Roth conversion — and Roth conversions have no income limit (IRS). Tax rules like the pro-rata rule still apply.

Is a backdoor Roth conversion taxable?  

It can be. Any pre-tax amount you convert is taxed as ordinary income in the year of the conversion; after-tax (non-deductible) contributions are not taxed again. The pro-rata rule determines the taxable share when you hold both pre-tax and after-tax IRA money. 

What is the pro-rata rule?  

The IRS treats all your traditional, SEP, and SIMPLE IRAs as one account and taxes a conversion proportionally across pre-tax and after-tax dollars — so you can’t convert only your after-tax contribution if you also hold pre-tax IRA balances.

What is the deadline for a backdoor Roth IRA?

The traditional IRA contribution for a given tax year is generally due by that year’s tax-filing deadline (usually mid-April of the following year). The conversion, by contrast, is reported in the calendar year it actually happens — so a contribution and its conversion can fall in different tax years, which affects when the tax is due.

How is a mega backdoor Roth different from a backdoor Roth?

A backdoor Roth uses IRA contributions and conversions; a mega backdoor Roth uses after-tax contributions inside a workplace 401(k) that allows them, potentially moving much larger amounts into a Roth. The mega backdoor is only available if your specific plan permits after-tax contributions and in-plan conversions or in-service withdrawals.

Investing involves risk, including the possible loss of principal. This content is educational and is not personalized investment, tax, or legal advice. M1 does not provide tax advice; consult a qualified professional about your situation. Tax rules referenced are set by the IRS and change periodically — verify current rules at IRS.gov. Brokerage products and IRAs are offered by M1 Finance LLC, member FINRA/SIPC. A platform fee and other fees may apply; see the M1 Fee Schedule.

SAIF-08042026-ffvmyw1u