If you don’t have any existing IRA balances or very small ones, the backdoor Roth strategy can be a highly impactful use of the non-deductible IRA contribution. Individuals should consider this if they exceed the income limit for a direct Roth contribution. For 2026, the single phase-out is $153,000 – $168,000. The Married Filing joint phase-out is $242,000 – $252,000.
To execute the backdoor Roth strategy, you make a non-deductible contribution to your traditional IRA and then request conversion to your Roth IRA. For 2026, the contribution limit is $7,500. If you have no other balances in traditional IRAs (including SEP and Simple IRAs), the tax cost of this conversion is $0 if you complete the conversion before any earnings accrue.
However, let’s say you have another IRA with $192,500 in it as of 12/31. Instead of having 0% of the $7,500 conversion taxed, you will now be taxed on 96.25% of it. Because $7,500 is only 3.75% of $200,000 (the combination of your conversion amount plus your 12/31 IRA balance). So $7,219 of your conversion becomes taxable income. Ouch! You can see why we only recommend this strategy if there are no other IRA balances, or only very small ones.
To successfully execute the backdoor Roth strategy, it needs to properly reported on your tax return. Reporting involves the 1099R you will receive from the custodian for the conversion amount, and the 8606 to report the non-deductible contribution.
If you have questions about whether the backdoor Roth could be a good strategy for you, we’re happy to discuss it with you. You can reach us through our Contact Us page.