Backdoor Roth IRA and Mega Backdoor Roth: Steps, Limits and the Pro-Rata Rule

It is for people with earned income who are over the income limit for contributing to a Roth IRA. The limit is on modified adjusted gross income, and for 2026 the allowed contribution shrinks across the ranges below and reaches zero at the top (IRS Notice 2025-67). The IRS published the 2027 ranges on November 12, 2026 (Notice 2026-66).

A senior manager, physician or business owner in their late 50s is often well past these lines. So is a couple where one spouse has retired and the other still earns a large salary. Income from a Roth conversion is left out of this test, so converting does not itself push you over the line (26 U.S.C. 408A(c)(3)(B)).

Why bother for $8,600 a year? Three features of a Roth IRA matter more as you get closer to retirement.

• •No required minimum distributions. The original owner of a Roth IRA never has to take money out (IRS Publication 590-B). A traditional IRA generally requires withdrawals starting at age 73 (IRS).
• •The five-year period starts when you start. Earnings in a Roth IRA come out tax-free only after 59½ and after a five-year period that begins with the first year you fund any Roth IRA. Someone who has never had one and starts at 58 is clear at 63.
• •Heirs receive it tax-free. Most non-spouse beneficiaries must empty an inherited Roth IRA by the end of the tenth year after death, but qualified distributions are not taxed. Our guide to inherited IRAs and the 10-year rule covers the beneficiary side.

A couple who are both over 50 and both do this from 58 to 65 move $137,600 of contributions into Roth IRAs at 2026 limits, before any growth. That is modest next to a 401(k), and it sits alongside the larger decisions covered in Roth vs. traditional IRA and Roth conversions before RMDs. If your plan supports the mega backdoor Roth described below, the amounts are several times larger.

There is no account type called a backdoor Roth and no election to make. It is a contribution followed by a conversion, each reported the ordinary way.

Timing. A conversion belongs to the calendar year in which the money leaves the traditional IRA. A contribution can be made for the prior year up to the filing deadline. So a contribution made in March 2027 for 2026 and converted the same week puts the contribution on the 2026 Form 8606 and the conversion on the 2027 form. That is allowed; it just means the basis carries from one year’s form to the next. Contributing and converting in the same calendar year keeps everything on one form.

Earnings in between. Whatever the contribution earns before you convert is pre-tax money. If $8,600 earns $40 of interest and you convert all $8,640, the taxable amount is $40. Leaving the contribution in cash for the few days between the steps keeps that number near zero.

If you are 73 or older and still working. You can still contribute, but amounts that must come out as a required minimum distribution for the year cannot be converted (Publication 590-A).

It stops you from converting only your after-tax dollars. For tax purposes, all of your individual retirement plans other than Roth IRAs are treated as one contract, all distributions in a year as one distribution, and the value is measured at the close of the calendar year (26 U.S.C. 408(d)(2)). The Form 8606 instructions spell out what that covers: traditional IRAs, including traditional SEP and SIMPLE IRAs (Instructions for Form 8606). A rollover IRA from an old 401(k) is a traditional IRA.

The arithmetic on Form 8606, Part I, comes down to one fraction:

The date matters. The balance that counts is the one on December 31 of the year you convert, not the balance on the day of the conversion. A rollover from an old 401(k) into an IRA in November spoils a conversion made the previous February.

A worked example

Take a hypothetical 58-year-old with a $200,000 rollover IRA, all pre-tax. She contributes $8,600 to a new traditional IRA, does not deduct it, and converts $8,600 a week later. On December 31 the rollover IRA is still worth $200,000.

She expected a tax-free conversion and instead adds $8,245 to her income, about $2,639 of federal tax at a 32% rate. The money is not taxed twice: the $8,245 of unused basis stays attached to her traditional IRAs and comes out tax-free, a sliver at a time, with later withdrawals or conversions. But the backdoor did not do what she wanted, and she now has a basis to track on Form 8606 for as long as she owns a traditional IRA.

Even $10,000 of forgotten pre-tax money makes more than half of the conversion taxable. Above $100,000 the conversion is almost entirely taxable.

What is not counted

• •Your spouse’s IRAs. Form 8606 is filed per person, on the value of your own IRAs. If both spouses must file, each files a separate form (Instructions for Form 8606). One spouse’s rollover IRA does not affect the other spouse’s backdoor Roth.
• •IRAs you inherited from someone other than a spouse. An inherited IRA keeps its own basis, which cannot be combined with the basis in your own IRAs, and is figured on a separate Form 8606 (Publication 590-B).
• •Money in a 401(k), 403(b) or other employer plan. The rule aggregates individual retirement plans only. This is the basis of the fix in the next section.
• •Roth IRAs. The aggregation rule is applied separately to Roth IRAs and to other IRAs (26 U.S.C. 408A(d)(4)(A)).

If the pre-tax IRA balance is gone by December 31, the fraction above becomes 100% tax-free. The way to make it go, without paying tax on it, is to roll it into a workplace plan. The tax code helps here: when you roll IRA money into an employer plan, the rollover is treated as coming from the taxable, pre-tax part of your IRAs first, and only that part may be rolled over (26 U.S.C. 408(d)(3)(H); Publication 590-A). The after-tax basis stays behind in the IRA, ready to convert.

In the example, the 58-year-old rolls her $200,000 rollover IRA into her current employer’s 401(k) in October, then converts the $8,600. Her traditional IRAs are worth zero on December 31, and the conversion is tax-free apart from any earnings.

The fix has limits:

• •The plan has to accept roll-ins. Plans may accept rollovers from IRAs but are not required to (Publication 590-A). Ask the plan administrator and get the answer from the plan document.
• •You need a plan. A retiree with no current employer plan has nowhere to send the money. A self-employed person can use a solo 401(k) whose document accepts rollovers.
• •It must be finished by December 31. The Form 8606 instructions say not to count an outstanding rollover from a traditional IRA to a qualified plan, but the money has to have left the IRA.
• •You give up the IRA’s flexibility. Inside the plan, the money is limited to the plan’s investment menu, fees and withdrawal rules. Our guide to rolling a 401(k) to an IRA covers that trade-off from the other direction.
• •SEP and SIMPLE IRAs count too. A business owner still receiving SEP contributions will have a pre-tax IRA balance every December.

The alternative is to convert the whole pre-tax balance and pay the tax, which is simply a large Roth conversion. Whether that makes sense is the bracket question in Roth conversions before RMDs, and the Roth conversion calculator runs the numbers.

The mega backdoor Roth applies the same idea to a 401(k), with much higher limits. A 401(k) can take three kinds of employee money: pre-tax deferrals, Roth deferrals, and after-tax contributions that are neither. The first two share the $24,500 deferral limit for 2026. After-tax contributions do not. They are limited only by the overall cap on annual additions under section 415(c): the lesser of 100% of your compensation or $72,000 for 2026, counting your deferrals, employer contributions and after-tax contributions together (26 U.S.C. 415(c); IRS). The cap rises to $75,000 for 2027 (Notice 2026-66).

Catch-up contributions sit outside that cap (26 U.S.C. 414(v)(3)), so being over 50 does not shrink the after-tax room. The table shows a hypothetical employee earning $250,000 who defers the maximum and receives a 4% match of $10,000.

The deferral with catch-up is $32,500 at 50 and $35,750 in the years you turn 60 through 63. Our guide to maxing out a 401(k) covers those limits, and the 401(k) calculator projects the balance.

Getting the after-tax money into Roth

After-tax contributions on their own are a poor deal: the contributions come back tax-free, but their earnings are pre-tax and taxed as ordinary income when withdrawn (IRS). The point is to convert them, and there are two ways.

• •In-plan Roth rollover. A plan with a designated Roth account may let you move after-tax contributions and their earnings into it. The earnings are taxable in the year of the rollover; the contributions are not. The plan decides which amounts are eligible and how often, and an in-plan Roth rollover cannot be reversed (26 U.S.C. 402A(c)(4); IRS).
• •In-service distribution to a Roth IRA. If the plan lets you withdraw after-tax money while still employed, you can roll it out. Under Notice 2014-54, amounts paid at the same time to different destinations are one distribution, and the pre-tax part is assigned first to the direct rollover you choose. So the after-tax contributions can go to a Roth IRA and their earnings to a traditional IRA, with no tax due (IRS Notice 2014-54; IRS).

Suppose $37,500 of after-tax contributions has earned $1,500 by the time it is moved. An in-plan Roth rollover of the $39,000 adds $1,500 to income. A distribution that sends $37,500 to a Roth IRA and $1,500 to a traditional IRA adds nothing, but it leaves $1,500 of pre-tax money in a traditional IRA, which then counts against you under the pro-rata rule if you also do a backdoor Roth IRA that year. Sending the earnings to the Roth IRA as well, and paying tax on them, avoids that.

One restriction is easy to miss. A partial distribution from a plan account that holds both pre-tax and after-tax money carries a proportional share of each; you cannot withdraw only the after-tax dollars and leave their earnings behind (IRS). Frequent conversions keep the earnings small.

What the plan must allow

Nothing requires a 401(k) to offer any of this. Three things have to be in the plan document: after-tax employee contributions, a way to convert them (an in-plan Roth rollover, an in-service distribution, or both), and enough room under the plan’s own limits. Ask the plan administrator each of those three questions separately.

Then there is testing. After-tax contributions are included in the actual contribution percentage (ACP) test, which compares the matching and after-tax contributions of highly compensated employees with those of everyone else (26 U.S.C. 401(m); IRS). For 2026, a highly compensated employee is generally a more-than-5% owner or someone paid more than $160,000 by the employer in the prior year. A safe harbor design exempts a plan’s matching contributions from the test, but a plan that takes after-tax contributions must still pass the ACP test on them (26 CFR 1.401(m)-3(j)(6)). If few lower-paid employees make after-tax contributions, the test fails and the plan must correct it, which can mean your after-tax contributions are capped or returned even though the dollar limit has room.

Solo 401(k) plans

A business owner with no common-law employees does not need nondiscrimination testing, because there is no one to compare with (IRS). The other requirements still apply. The plan document has to permit after-tax contributions and a conversion route, and the overall limit is still the lesser of $72,000 or 100% of compensation, which for a self-employed person means net earnings from self-employment after half of the self-employment tax and the owner’s own plan contributions. Hiring an eligible employee brings the testing rules back.

Roth IRAs have two separate five-year periods, and they answer different questions (Publication 590-B).

Withdrawals that are not qualified come out in a fixed order: regular contributions first, then conversions, oldest year first, with the taxable part of each conversion ahead of its nontaxable part, and earnings last. All your Roth IRAs are added together for this purpose (26 U.S.C. 408A(d)(4)).

If you are over 59½. The conversion period no longer matters to you. Converted amounts can be withdrawn at any time with no tax and no additional tax. The only open question is the ownership period, and only for earnings. Someone who opens a first Roth IRA with a backdoor conversion at 62 can take out the converted dollars freely; the earnings become tax-free from the fifth January after the year the account was first funded. If you already have a Roth IRA more than five years old, everything in it is available tax-free.

If you are under 59½. Both periods apply. The 10% additional tax reaches only the part of a conversion that you had to include in income (26 U.S.C. 408A(d)(3)(F)), so a backdoor conversion that was almost entirely basis has little exposed to it. One that was largely taxable under the pro-rata rule has more, and that part is locked up for five tax years unless an exception applies. Earnings withdrawn before 59½ are taxed and generally owe the 10% as well.

Money converted inside a 401(k) follows the plan’s rules instead. A designated Roth account has its own five-taxable-year period, counted from your first Roth contribution to that plan. When you later roll it to a Roth IRA, the time in the plan does not count toward the Roth IRA’s period; the Roth IRA’s own start date governs (IRS). That is one more reason to have a Roth IRA open, with even a small balance, years before you expect to roll a Roth 401(k) into it. Neither Roth IRAs nor designated Roth accounts have required minimum distributions during the owner’s life (IRS).

The Roth IRA calculator projects what yearly contributions grow to.

For years the worry was that the IRS might treat a contribution and an immediate conversion as a single step, a direct Roth contribution by someone not allowed to make one, and tax it as an excess contribution. Here is what the record says.

• •The statute sets no income limit on conversions. The $100,000 income cap on converting was repealed for tax years beginning after December 31, 2009 (26 U.S.C. 408A, amendment notes). Traditional IRA contributions have no income limit; only the deduction does (Publication 590-A).
• •Congress described the two-step route in 2017. The conference report to the 2017 tax law states, in footnotes 268 and 269, that although an individual with income above the limits is not permitted to contribute directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA. Footnotes 276 and 277 repeat that the law does not preclude this (H. Rept. 115-466).
• •IRS publications set no waiting period. Publication 590-A and the Form 8606 instructions describe nondeductible contributions and conversions without requiring any interval between them (Publication 590-A; Instructions for Form 8606).

A conference report is legislative history, not a statute or a ruling. We did not find a regulation or revenue ruling that addresses the timing directly, and we cite none. What can be said is that the law permits each step, Congress has described doing them in sequence, and the form the IRS provides reports exactly that.

• •Forgetting Form 8606. Without it, the IRS has no record of your basis, and all of the IRA is treated as deductible money, taxable on the way out, unless you can prove otherwise. The penalty for not filing is $50; overstating nondeductible contributions costs $100 (Publication 590-A). Keep every year’s Form 8606; our list of financial records to keep explains why these are permanent.
• •Converting with a forgotten rollover IRA. An old 401(k) rolled to an IRA a decade ago, a SEP IRA from a consulting year, a SIMPLE IRA from a former employer: each counts on December 31.
• •Rolling a 401(k) into an IRA later the same year. Retiring in the autumn and rolling the 401(k) to an IRA puts a large pre-tax balance on the year-end statement and makes that year’s backdoor conversion mostly taxable.
• •Contributing without earned income, or over the limit. Contributions above your compensation or above the annual limit are excess contributions, taxed at 6% for every year they remain. Withdrawing the excess and its earnings by the due date of the return, including extensions, avoids the 6% (Publication 590-A). This catches people in the first full year of retirement.
• •Contributing to a Roth IRA and a backdoor in the same year. The $8,600 limit is shared across all your traditional and Roth IRAs.
• •Ignoring state tax. States have their own rules for IRA basis and conversions. Massachusetts, for example, taxes the amount of a conversion that is included in federal income, and separately lets IRA withdrawals come out untaxed until contributions it already taxed have been recovered (M.G.L. c. 62, § 2). A clean backdoor has little federal taxable income to pass through; one caught by the pro-rata rule does. Our state retirement-tax pages cover the states one by one.
• •Overlooking IRMAA when the conversion is partly taxable. Medicare sets Part B and Part D premiums from the tax return two years earlier (SSA POMS HI 01101.020). A conversion at 63 or later can raise premiums two years on. For 2026 premiums the first surcharge tier begins above $109,000 of income for single filers and $218,000 for joint filers; in that tier Part B costs $284.10 a month instead of $202.90, and with the Part D add-on the extra is about $1,148 a year per person (CMS). The tiers are steps, so a few thousand dollars of taxable conversion can cross one. A clean backdoor adds almost nothing to income and does not. See the current IRMAA brackets.
• •Confusing the Roth catch-up rule with the after-tax limit. From 2026, if your Social Security wages from the employer were above $150,000 in the prior year, your 401(k) catch-up contributions must be made as Roth (IRS; 26 U.S.C. 414(v)(7)). For 2027 catch-ups the threshold is $155,000 of 2026 wages (Notice 2026-66). Those catch-ups are already Roth, need no conversion, and do not use any of the $72,000 cap. The rule covers employer plans, not the $1,100 IRA catch-up.
• •Letting after-tax 401(k) money sit. Until it is converted, its earnings are building up as pre-tax income.

The 2026 tax brackets show the rate a taxable conversion would be taxed at.

Congress has tried to end both strategies once, and came close.

The Build Back Better Act, as passed by the House on November 19, 2021, contained section 138311. It would have barred converting any after-tax amount, from an IRA or an employer plan, to Roth for distributions after December 31, 2021, which would have ended the backdoor Roth and the mega backdoor Roth for everyone. A second part would have barred all Roth conversions by high-income taxpayers from 2032 (H.R. 5376, engrossed in House). The Senate did not pass that text. The bill enacted under the same number in August 2022, the Inflation Reduction Act, contains no Roth provisions (Public Law 117-169).

We checked for changes since. The July 2025 tax law did not amend section 408A, which holds the conversion rules (Public Law 119-21). On July 22, 2026, Representative Richard Neal and Senator Ron Wyden introduced a bill aimed at very large accounts. According to its sponsors’ summary, it would prohibit further IRA contributions by people whose IRA and defined contribution balances total more than $10 million and whose income is above $400,000 ($450,000 for joint filers), for tax years after 2026, and would require distributions from such accounts after 2033 (press release; summary). The summary lists no restriction on conversions by anyone else. The bill has not been enacted.

As of November 14, 2026, the backdoor Roth IRA and the mega backdoor Roth are both permitted under current law. The 2021 text shows what a repeal would look like: it applied going forward and did not undo conversions already made.

The backdoor Roth is a small, clean transaction for some people and a poor one for others. These are the situations where it tends not to pay.

• A large pre-tax IRA and no plan to roll it into. The conversion is mostly taxable, and you take on a Form 8606 basis to track for years. The table above shows the result.
• A short horizon. The gain from a Roth is tax-free growth. $8,600 that will be spent in three years earns little growth to shelter, and before the ownership period ends the earnings are taxable anyway.
• Income under the limit. Below $153,000 single or $242,000 joint, a direct Roth IRA contribution does the same thing in one step with no Form 8606.
• A low bracket now. In a low-income year, such as the gap between retirement and required distributions, an ordinary conversion of pre-tax IRA money moves far more than $8,600 at a modest rate. The backdoor is a tool for high-income years when nothing else gets money into a Roth.
• No earned income. Without compensation there is no contribution to convert.
• Unused room elsewhere. Someone not yet filling the $24,500 deferral, the catch-up or an employer match has simpler places to put the next dollar.
• A mega backdoor without a conversion route. After-tax contributions that cannot be converted until you leave the employer accumulate taxable earnings in the meantime.