Step-by-step · 3 min read
Backdoor Roth and mega backdoor Roth
Above certain incomes you cannot contribute to a Roth IRA directly. The backdoor Roth gets you there in two steps: a non-deductible contribution to a traditional IRA, then a conversion to Roth.
Many tech 401(k) plans also offer a much larger version, the mega backdoor Roth, which can move tens of thousands of dollars a year into Roth accounts. Both are legal and routine when done in the right order.
- Who it fits
- High earners who are over the Roth IRA income limits.
- Usually not a fit
- Anyone with large pre-tax IRA balances they cannot move into a 401(k).
- Figures
- 2026 tax year
The key rule
Backdoor Roth: contribute to a traditional IRA without taking a deduction, then convert it to a Roth IRA. Mega backdoor: make after-tax (not Roth) 401(k) contributions, then convert them to Roth.
How it works
Roth accounts grow tax-free, and qualified withdrawals in retirement are tax-free too. There is no income limit on converting money to Roth, only on contributing directly. The backdoor uses that gap.
The 2026 numbers you need:
| Single | Married filing jointly | |
|---|---|---|
| Roth IRA phase-out | $153,000–$168,000 | $242,000–$252,000 |
| IRA contribution | $7,500, or $8,600 at 50 and older | |
| 401(k) employee deferral | $24,500 | |
| 401(k) total limit | $72,000 before catch-ups | |
8 steps
Check the income limit
If your income is above the top of the phase-out range, use the backdoor. Inside the range, you can contribute partly directly. Below it, contribute directly.
Clear out pre-tax IRA money
The pro-rata rule looks at all your traditional, SEP and SIMPLE IRA balances on December 31 of the year you convert. If you have any, roll them into your current 401(k) first, if your plan accepts rollovers, and do it in the same calendar year.
Make the non-deductible contribution
Put up to $7,500 ($8,600 if 50 or older) into a traditional IRA. You can contribute for the prior year until the April filing deadline, but contributing in the current year keeps things simpler.
Convert to Roth
Once the cash settles, usually within a few days, convert the whole balance to your Roth IRA. Leave it in cash or a money market fund until then, so little or no earnings build up.
Check whether your 401(k) allows the mega backdoor
Ask HR or check your plan summary for two features: after-tax (non-Roth) contributions, and either in-plan Roth conversions or in-service withdrawals of after-tax money.
Set up the after-tax contributions
Your room is $72,000 minus your $24,500 deferral minus your employer match. Choose an after-tax percentage of pay that fills it over the year.
Turn on automatic conversion
Many plans can convert after-tax money to Roth each pay period. If yours does, turn it on so earnings never build up in the after-tax bucket.
Keep the paperwork
You will receive a 1099-R for each conversion and a 5498 for each IRA contribution. We report the non-deductible contribution on Form 8606 so you are not taxed twice.
Example 1
Mega backdoor room
You defer $24,500 and your employer matches $10,000. Your after-tax room for 2026 is $72,000 − $24,500 − $10,000 = $37,500. Converted to Roth each paycheck, that money grows tax-free for decades.
Example 2
The pro-rata trap
You have $92,500 in an old rollover IRA and contribute $7,500 non-deductible. Your total IRA balance is $100,000, of which 7.5% is after-tax. Converting $7,500 means 92.5% of it, about $6,900, is taxable. Rolling the $92,500 into your 401(k) before December 31 avoids this.
Common mistakes
- Choosing Roth 401(k) instead of after-tax 401(k) for the mega backdoor. They are different buckets.
- Rolling an old 401(k) into an IRA mid-year, which creates a pro-rata problem.
- Forgetting Form 8606, which can lead to double tax years later.
- Deducting the IRA contribution by mistake in tax software.
Key dates
- December 31
- IRA balances measured for the pro-rata rule; deadline for conversions to count this year.
- April filing deadline
- Last day for prior-year IRA contributions.
Questions we hear
Is the backdoor Roth allowed?
Yes. Congress and the IRS have acknowledged it. The key is doing the steps in order and reporting them correctly.
Can my spouse do one too?
Yes, each spouse can have their own IRA, even if only one has earned income, as long as joint earned income covers both contributions.
What to send us
- 1099-R forms
- Form 5498 and year-end IRA statements
- Your 401(k) plan summary
Upload them to your client portal.
General education for TaxSquad clients, not advice for your situation. Rules and figures change. Talk to us before acting on this guide.