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What is a Backdoor Roth IRA?

A Backdoor Roth IRA is a strategy designed for individuals whose income is too high to contribute directly to a Roth IRA under IRS rules. Instead of contributing straight to a Roth IRA, you make a nondeductible contribution to a Traditional IRA and then convert those funds to a Roth IRA.

There are no income limits on Roth IRA conversions, which is why this approach is commonly used by higher-income earners. Once the funds are in the Roth IRA, future qualified withdrawals may be tax-free, and Roth IRAs are not subject to Required Minimum Distributions during the original account owner’s lifetime.

The Backdoor Roth IRA is a legal strategy recognized by the IRS, but it does involve specific tax rules and reporting requirements. Because of this, it is important to understand how the process works before moving forward.