Backdoor Roth IRA — Quick Guide + Full 2025 Walkthrough
At IronFjord Wealth Management, this is one of the strategies we implement for clients where it is appropriate. Our clients sit back and enjoy life while we handle the heavy lifting, from running the numbers, to managing the timing, to coordinating with their tax preparer.
Most people visiting a blog just want the “quick answer” first, then scroll for details if they’re interested. That’s why this post is structured in two parts:
Quick Guide — A fast, skimmable checklist to understand the Backdoor Roth IRA process.
Full Guide — A detailed step-by-step with examples, IRS references, and common pitfalls.
Quick Guide: Backdoor Roth IRA in 7 Simple Steps
Check your IRA balances — On Dec 31, do you have any pre-tax dollars in traditional, SEP, or SIMPLE IRAs? If yes, part of your conversion will be taxable. Ideally, you’ll have $0 in traditional, SEP, or SIMPLE IRAs before starting this process.
Roll in pre-tax dollars to a 401(k) — If your employer plan allows it, move pre-tax amounts out of IRAs before year-end to avoid pro-rata taxes. If you cannot move pre-tax amounts, you may want to reevaluate whether a backdoor Roth is for you.
Make a nondeductible IRA contribution — 2025 limit is $7,000, or $8,000 if you’re 50+.
Keep it in cash temporarily — Avoid taxable earnings before you convert.
Convert to a Roth IRA — No IRS waiting period required.
If you’re 73+, take your RMD first — RMDs can’t be converted.
Have your tax preparer file Form 8606 — This documents your nondeductible contribution and calculates the taxable portion.
Two rules you can’t ignore:
Conversion 5-year rule: If you’re under 59½, wait five tax years before withdrawing converted amounts that were taxable when converted, or you may owe a penalty.
Qualified distribution 5-year rule: Roth earnings are tax-free only after five tax years and a qualifying event (like turning 59½).
Common mistakes that cost people money:
Not having your tax preparer file Form 8606
Leaving pre-tax IRA money on Dec 31
Expecting to “undo” a conversion (not allowed since 2018)
Trying to convert an inherited IRA as a non-spouse
Full Guide Starts Here
What is a Backdoor Roth IRA?
If your income is too high for a direct Roth IRA contribution, you can still get money into a Roth by making a nondeductible contribution to a traditional IRA and then converting it to a Roth IRA. Done correctly, this can be a mostly tax-free process on the contributed amount.
Who the Backdoor Roth Works For
High earners above Roth IRA income limits.
2025 Roth IRA phase-out ranges for direct contributions:Single/Head of Household: $150,000–$165,000
Married filing jointly: $236,000–$246,000
Married filing separately: $0–$10,000
Anyone seeking Roth benefits, like tax-free qualified withdrawals and no lifetime RMDs.
Those ready to pay taxes on any taxable portion of the conversion.
Legal Status in 2025
Congress’s official explanation of the 2017 tax law confirmed that you can contribute to a traditional IRA and then convert to Roth, even if your income is above the Roth limits. Since January 1, 2018, you cannot recharacterize (undo) a Roth conversion.
The Six Steps in Detail
1. Check for Existing Pre-Tax IRA Balances
On December 31, the IRS looks at the total value of all your non-Roth IRAs (traditional, SEP, SIMPLE). This determines the taxable portion of your conversion.
Tip: Consider moving pre-tax IRA dollars into a 401(k) that accepts roll-ins. This strategy works best for those with $0 in their non-Roth IRAs (traditional, SEP, SIMPLE). If you have a balance in these accounts that you cannot move, you should reevaluate if this strategy is a good fit for you.
2. Make a Nondeductible Traditional IRA Contribution
For 2025, the contribution limit is $7,000 ($8,000 if 50+).
Deadline: tax filing day for that year (April 15, 2026, for 2025 contributions).
3. Limit Earnings Before Conversion
Keep the contribution in cash or a money market position to avoid taxable growth before conversion.
4. Convert to Roth
Request a traditional-to-Roth conversion from your custodian. The IRS has no waiting period between contribution and conversion.
5. Take RMDs First if Age 73+
If you’re subject to RMDs, you must take them before converting — RMDs cannot be converted.
6. Have Your Tax Preparer File Form 8606
Form 8606 must be filed with your tax return by your tax preparer to record your nondeductible IRA contribution and calculate the taxable portion of the conversion.
Understanding the Pro-Rata Rule
The IRS treats all non-Roth IRAs as one combined account. Your after-tax basis ÷ total value of all IRAs on Dec 31 = percentage of your conversion that’s tax-free.
Example:
Total IRA balance: $100,000
After-tax basis: $6,000
Tax-free portion: 6% → $360 tax-free, $5,640 taxable.
Two Five-Year Rules
Conversion rule: Each taxable conversion has its own 5-year penalty clock if you’re under 59½.
Qualified distribution rule: Earnings are tax-free only after 5 years and a qualifying event.
Common Pitfalls
Pre-tax IRA balances on Dec 31 → pro-rata taxation.
Missing RMD before conversion.
Tax preparer failing to file Form 8606.
Expecting to reverse a conversion.
Converting an inherited IRA as a non-spouse.
Annual Workflow for a Clean Backdoor Roth
Confirm no pre-tax IRA money will remain on Dec 31.
Make a nondeductible IRA contribution.
Keep it in cash until conversion.
Convert to Roth.
Confirm $0 pre-tax IRA balance on Dec 31.
Have your tax preparer file Form 8606 with your tax return.
Disclaimer
This content is for educational purposes only. We make best efforts to check for accuracy, but tax laws and IRS guidance can change. This post does not constitute individualized tax or investment advice. Any decisions about your own IRA contributions or conversions must be made in consultation with your tax professional or a Registered Investment Advisor (RIA).
