Backdoor Roth IRA Calculator

A backdoor Roth IRA is a legal tax strategy used by high-income earners who exceed the income limits for direct Roth IRA contributions. It involves making a non-deductible contribution to a Traditional IRA and then converting that balance into a Roth IRA.

The IRS views all your non-Roth IRAs (Traditional, SEP, and SIMPLE) as a single, commingled account. When you do a Roth conversion, you cannot choose to only convert the non-deductible (after-tax) dollars. The pro-rata rule dictates that the conversion is taxed proportionally based on the ratio of your pre-tax to after-tax dollars across all your IRAs.

Almost anyone with earned income can technically perform a backdoor Roth conversion. However, it is usually not recommended if you have a massive pre-tax IRA balance that you cannot roll into a 401(k), as the pro-rata rule will trigger a large tax bill on the conversion.

You can legally avoid the pro-rata rule by "hiding" your pre-tax IRA balances before December 31st of the year you do the conversion. The most common method is rolling your pre-tax Traditional, SEP, or SIMPLE IRA balances into an employer-sponsored plan like a 401(k) or 403(b), provided the plan accepts incoming rollovers.

Yes, as of current tax law, the backdoor Roth IRA remains a perfectly legal strategy. Congress has debated removing it in the past (e.g., Build Back Better Act), but those provisions were dropped. Always consult a tax professional for the latest changes to tax laws.