The Backdoor Roth and the Mega Backdoor Roth

High earners cannot contribute to a Roth IRA directly, but the law offers two routes that end in the same place: the backdoor Roth, which runs a contribution through a traditional IRA, and the mega backdoor Roth, which uses after-tax money inside a 401(k). Both are legal and widely used, and both are easy to get wrong in ways that turn a tax-free move into a taxable one. This chapter explains how each works, the pro-rata rule that decides whether a backdoor is clean, and what your plan has to allow before a mega backdoor is possible.

Why the front door closes

A Roth IRA contribution is allowed in full only below an income range, reduced inside it, and not allowed above it. For 2026 the range, measured on modified adjusted gross income, runs from $153,000 to $168,000 for single filers and from $242,000 to $252,000 for married couples filing jointly. Married people who file separately and lived together during the year have almost no room at all.

Two other rules have no income limit. Anyone with earned income (or a spouse with earned income, on a joint return) may contribute to a traditional IRA; above certain incomes the contribution is simply not deductible. And anyone may convert a traditional IRA to a Roth IRA, whatever their income. The backdoor uses the two together. In 2026 the IRA limit is $7,500, plus $1,100 for people 50 or older, shared across all your traditional and Roth IRAs.

The backdoor Roth, step by step

1. Check the pro-rata pool first (the next section). If you hold pre-tax money in any traditional, SEP or SIMPLE IRA, the backdoor will be partly taxable unless you move that money first.
2. Make a nondeductible contribution to a traditional IRA. For a tax year, you can contribute from January 1 until the tax filing deadline in April of the following year. If you contribute between January and April, tell the custodian which year it is for.
3. Convert it to your Roth IRA. No rule sets a waiting period. Leaving the money in cash until the conversion keeps earnings small; any earnings before conversion are taxable when converted, so a short wait costs little and a long wait invested in stocks can cost more.
4. File Form 8606 with your tax return. Part I records the nondeductible contribution (your "basis"). Part II reports the conversion and works out the taxable part. If the contribution and conversion fall in different calendar years, you file the form in both years. Without it, the IRS has no record of your basis and the whole conversion can be taxed.

Each spouse has their own IRAs, so a married couple can each do a backdoor, and the pro-rata rule is applied to each spouse's IRAs separately. A spouse with no earnings can still contribute on a joint return if the couple's combined earned income covers both contributions.

The pro-rata rule: why one old IRA can spoil it

The IRS treats every traditional, SEP and SIMPLE IRA you own as a single pool. You cannot choose to convert only the after-tax dollars. Instead, the share of any conversion that is tax-free equals your after-tax basis divided by the total of three things: the value of all those IRAs on December 31 of the conversion year, plus amounts converted during the year, plus other distributions during the year.

An example in proportions makes the effect clear. Suppose you hold an old rollover IRA of pre-tax money nine times the size of your new nondeductible contribution. Your basis is then one-tenth of the pool, so only one-tenth of what you convert is tax-free and about nine-tenths is taxed as ordinary income, even if you convert only an amount equal to the new contribution. The unused basis carries forward to later years, but the clean, tax-free backdoor you intended did not happen.

Three details decide whether you can fix it:

• The pool is measured on December 31. If your employer's 401(k) accepts incoming rollovers of pre-tax IRA money, moving it there before the end of the conversion year takes it out of the calculation. Plans are not required to accept rollovers, so ask first.
• Workplace plans do not count. Money in a 401(k), 403(b), governmental 457(b) or solo 401(k) is outside the pool. Money in a SEP IRA or SIMPLE IRA is inside it, which matters for self-employed people (the next chapter covers the choice of plan).
• Inherited IRAs and Roth IRAs do not count. Only your own traditional, SEP and SIMPLE IRAs do.

The backdoor Roth calculator runs the Form 8606 arithmetic with your balances.

The mega backdoor Roth: after-tax money in a 401(k)

A 401(k) has two different limits. The first is the employee deferral limit, $24,500 in 2026, which covers your own pre-tax and Roth 401(k) contributions together. The second is the total limit on everything that goes into your account for the year, from you and your employer: $72,000 in 2026, or 100% of your pay if that is less. Catch-up contributions sit outside this total.

The space between the two can be filled with after-tax contributions, if the plan allows them. With no employer money at all, that space is $47,500. Every dollar of employer match or profit sharing reduces it. After-tax money is not the same as a Roth 401(k) deferral: it goes in after tax, but its earnings are taxable when withdrawn, until it is converted to Roth. The "mega backdoor" is the second step, moving after-tax money into a Roth account quickly, so that future growth is tax-free.

For it to work, the plan must offer both of these:

• After-tax (non-Roth) contributions above the deferral limit. Many plans do not offer them at all.
• A way to move them to Roth: an in-plan Roth conversion (the money moves to the Roth part of the same 401(k)) or an in-service withdrawal (the money leaves the plan while you still work there and is rolled to a Roth IRA). Some plans limit how often, or only allow it after a certain age.

Your plan's summary plan description, or a direct question to the plan administrator, settles this. The mega backdoor Roth calculator works out your room from your pay, contributions and match.

Mega backdoor details that change the result

• Earnings before conversion are taxable. After-tax contributions that sit for months in stock funds will have taxable gains when converted. Plans that convert automatically after each paycheck keep that close to zero.
• Splitting a withdrawal. When after-tax money and its earnings leave the plan together, IRS rules let you send the after-tax contributions to a Roth IRA and the pre-tax earnings to a traditional IRA (or convert the earnings and pay tax on them).
• Nondiscrimination testing. Plans must show that after-tax and matching contributions do not favor highly compensated employees too much. If lower-paid employees contribute little, the plan may cap or refund after-tax contributions for higher earners. A plan designed under the safe-harbor rules still has to test after-tax contributions, so ask whether limits were applied last year.
• Cash flow. After-tax contributions come out of take-home pay with no tax break today. They make most sense after an emergency fund is in place and other tax-advantaged room is used.
• Where the Roth money ends up. An in-plan conversion leaves it in a Roth 401(k); since 2024 those accounts have no required distributions during the owner's life, so the main differences from a Roth IRA are investment choice and how the five-year rules are counted. Many people roll a Roth 401(k) to a Roth IRA when they leave the employer.
• Catch-up contributions for higher earners. From 2026, if your Social Security wages from the employer were above $150,000 last year, any catch-up contributions you make at 50 or older must go in as Roth. The final rules apply fully from 2027, with good-faith compliance before then.

A solo 401(k) can include after-tax contributions and in-plan conversions too, but only if the plan document allows them; many off-the-shelf solo plans do not.