Multiply your potential, exponentially.
Answer (2026): A backdoor Roth is two steps: a nondeductible IRA contribution, then a Roth conversion. The pro-rata rule is the part that surprises people, because it looks at all traditional, SEP, and SIMPLE IRAs. Form 8606 is how you keep your basis straight.
Context: Best for high-income earners who are over Roth income limits and still want Roth space.
Action: Start with Tax Optimization, then run a Year-End Tax Projection to see bracket impact before converting.
Last reviewed: January 21, 2026.
Inventory IRA balances. Include traditional, SEP, and SIMPLE IRA balances for the pro-rata calculation.
Check rollover options. If pre-tax balances are material, evaluate whether your employer plan accepts rollovers.
Make a nondeductible contribution. Record the basis for Form 8606.
Convert to Roth. Keep confirmation statements for your records.
File Form 8606. This is the audit trail that prevents double taxation.
The taxable portion is based on the ratio of pre-tax IRA money to total IRA money, not just the new contribution. If you already have a pre-tax IRA balance, most of the conversion may be taxable even when the contribution itself was nondeductible. That is the common surprise.
| IRA balances (pre-tax) | Nondeductible contribution | Taxable portion of conversion |
|---|---|---|
| $0 | $7,000 | 0% |
| $93,000 | $7,000 | ~93% |
A W-2 executive has a large traditional IRA from an old rollover. They move that balance into their current employer plan, then complete the nondeductible contribution and conversion with a much smaller tax bill.
Run a Year-End Tax Projection to see bracket impact, then coordinate the rollover and Form 8606 steps with a qualified professional.
This guide is for planning and coordination only. It does not provide tax, legal, or investment advice. Confirm eligibility, timing, and reporting with a qualified professional.
