The “Backdoor Roth IRA” is a popular Roth conversion strategy that allows high-income earners to make Roth IRA contributions. Can you perform a Backdoor Roth IRA every year? The strategy can technically be done every year, pending potential rule changes enforced by the IRS. This would allow high-income earners the ability to maximize contributions annually and get those funds into a after-tax Roth.

What Is a Backdoor Roth IRA?

The Backdoor Roth IRA is a strategy that allows high-income earners to contribute to a Roth IRA despite income limits. This approach involves contributing to a traditional IRA with after-tax dollars and then converting those funds to a Roth IRA. The contribution to the traditional IRA is made with after-tax dollars, avoiding extra taxes during the conversion. Once in the Roth IRA, investments grow tax free, and withdrawals in retirement are also tax free (as long as rules are followed). The Backdoor Roth IRA bypasses income limits by using a pretax IRA contribution.

History of the Backdoor Roth IRA Strategy

Beginning January 1, 2010, thanks to the changes resulting from the Tax Increase Prevention and Reconciliation Act (TIPRA), anyone can convert a pretax IRA to a Roth no matter their income level. Before that, anyone who had income above $100,000 was not allowed to do a Roth IRA conversion of pretax funds.

This prevented one from making an after-tax IRA contribution and then converting it to Roth. As a result of the 2008 financial crisis, tax revenue was significantly reduced. One way to increase tax revenue was to encourage IRA holders to convert their pretax IRAs to Roth since the converted amount is subject to ordinary income tax. Due to the passing of TIPRA, the Backdoor Roth IRA was created.

Roth IRA Rules for 2025

In 2025, the maximum Roth IRA contribution limit is $7,000 or $8,000 if at least age 50.

Understanding the Backdoor Roth IRA rules is critical to avoid penalties and ensure a smooth conversion process. For high-income individuals, contributing funds to a Roth IRA is only possible through the Backdoor Roth. This is because the IRS rules impose income limitations on Roth contributions but no longer include income limitations on Roth IRA conversions. If one is single and earns more than $161,000 or is married and files jointly and earns more than $240,000, one is not permitted to make direct Roth IRA contributions.

However, under the Backdoor Roth IRA strategy, one who earns more than the Roth income limitations can make an after-tax IRA contribution and then immediately convert the funds to Roth. Best of all, no taxes will be due.

How the Backdoor Roth IRA Works

After-tax contributions are contributions made to a traditional IRA that are not treated as tax deductible (no upfront tax break). However, income and gains on those contributions would be subject to tax. This is why making traditional, after-tax contributions other than for the purpose of a Backdoor Roth, makes little tax sense.

Essentially, you lose the tax advantage of the IRA since both contributions and distributions would be taxable. However, for high income earners, making an after-tax contribution is necessary in order to take advantage of the Backdoor Roth IRA strategy.

Learn More: Backdoor Roth vs Roth Conversion

How to Perform a Backdoor Roth IRA

Performing a Backdoor Roth IRA involves a four-step process:

1. Open a traditional IRA: Choose a custodian, such as IRA Financial, to open a new traditional IRA. Select a custodian that allows for easy conversion to a Roth IRA.
2. Make an after-tax, nondeductible contribution to the traditional IRA: The maximum annual contribution limit for a traditional IRA is $7,000 (or $8,000 if you’re 50 years old or older). Contributions are limited to earned income. If you have little or no earned income, you may be able to boost your IRA contribution based on your spouse’s earned income.
3. Immediately, and before you invest your cash contribution, convert the traditional IRA to a Roth IRA: You’ll owe income tax on any earnings accrued before the traditional IRA funds are converted to Roth. Most IRA contributions initially land in an interest-bearing cash account. Delaying the final step can lead to a tax bill and unnecessary headache.
4. Fill out Form 8606, Nondeductible IRAs, when filing your taxes for the year: Form 8606 is used to let the IRS know that your traditional IRA contribution was nondeductible. The IRS will assume a taxable traditional-to-Roth conversion if Form 8606 is not filed.

Can You Perform a Backdoor Roth IRA Every Year?

Yes! Because there are no income limits on conversions, you can perform a Backdoor Roth IRA every year as long as follow these “rules”:

• You have earned income at least equal to your contribution.
• You don’t exceed the IRA contribution limit ($7,000 or $8,000 if age 50+ for 2025).
• You watch out for the pro-rata rule (see below).

You can perform a Backdoor Roth IRA annually, and many high-income earners use this strategy every year to get around the income limits that normally restrict direct Roth contributions. To avoid unintended tax consequences, some investors “zero out” these accounts or roll pretax IRA assets into an employer-sponsored plan like a 401(k) before performing the Backdoor Roth. As long as you follow the rules carefully and report everything properly, you can repeat the Backdoor Roth process each year.

The “Pro Rata Rule”

As we just touched on, when you immediately convert after-tax funds to Roth, there is generally no tax due on the conversion. This is because you are not subject to double taxation in an IRA. The conversion should be done immediately so that there are no gains in the traditional plan; gains would be taxable. For example, if you contribute $5,000 after-tax to an IRA, and your investments generate $500 of income before you convert, that $500 in gains would be subject to tax.

The pro rata rules are most important when you already have pretax contributions in your IRA funds. Those need to be considered when you wish to perform a conversion because you cannot choose which funds get converted; all funds are considered, as per the IRS. So, if you have $50,000 in pretax IRA funds, and contribute $5,000 in after-tax funds to the IRA. Now you have $55,000 in a traditional IRA, over 90% of it is pretax. Therefore, when you perform a conversion, 90% of the converted amount would be taxable.

Here are a couple of examples of how the Backdoor Roth IRA solution works:

Example 1: Erin is married, and she and her husband have income over $240,000 for 2025. She could not make a Roth IRA contribution because her income is too high. Erin can make a traditional IRA contribution and not take a tax deduction (after-tax contribution) and can then immediately convert the after-tax funds to Roth. Let’s assume she has no other IRA funds, there would be no tax on the conversion from after-tax to Roth.

Example 2: Same facts as Example 1, but assume further that Erin wishes to make a Backdoor Roth IRA contribution of $5,000 in 2025 but had a traditional IRA worth $5,000 she started in 2018.  Under the pro-rata conversion rule, half of the amount converted would be taxable since she has 50% pretax and 50% after-tax IRA funds.

Is a Backdoor Roth IRA Worth It?

A Backdoor Roth IRA may be worth it for high-income earners who want to contribute to a Roth IRA despite income limits. However, it’s essential to consider the following factors:

• Tax implications: You may need to pay taxes on the converted amount, which could impact your tax bracket.
• Pro rata rule: The IRS applies the pro rata rule to the total IRA balance at year-end, not at the time of conversion. This means that you can’t choose to convert only after-tax money; the IRS will look at all traditional IRAs combined.
• Roth IRA conversions: You may need to pay taxes on the converted amount, which, again, could impact your tax bracket.
• Direct Roth IRA contributions: If at any point, you’re eligible for direct Roth IRA contributions, it is a better option than using the Backdoor Roth IRA strategy.

Ultimately, a Backdoor Roth IRA is worth it if you’re willing to navigate the complexities and potential tax implications. It’s essential to consult with a tax advisor or financial professional to determine if this strategy is right for you.

Roth IRA Advantage

The primary advantage of having a Roth IRA is the potential for tax-free growth, where all income and gains can be distributed without tax. In order to do so, they must be qualified distributions. You must satisfy two conditions: you must be at least age 59 1/2, and any Roth must have been open for at least five years. Once satisfied, you will never pay income tax or capital gains on a Roth withdrawal.

Further, contributions made to a Roth (assuming you are under the income thresholds) can be withdrawn at any time without tax or penalty. This is a great way to start an emergency fund. Use those contributions as needed, but remember not to touch earnings since those will be taxed and penalized until they are qualified.

In addition, the Roth IRA is not subject to required minimum distributions (RMDs). You can grow the account unhindered for as long as you want. This is a great estate planning tool if you won’t need that money during retirement.

Summary

The Backdoor Roth IRA is a strategy that allows high-income earners to contribute to a Roth IRA despite exceeding the IRS income limits for direct contributions. It involves making a non-deductible contribution to a traditional IRA and then converting that amount to a Roth IRA, typically shortly after, to minimize any taxable gains. This strategy can be used every year, as there are no income limits on Roth conversions and the annual IRA contribution limits apply regardless of income.

However, individuals must be cautious of the pro-rata rule, which can cause part of the conversion to be taxable if they have existing pretax IRA balances. To avoid this, many roll pretax IRA funds into a 401(k) before executing the Backdoor Roth. For those with minimal or no existing Traditional IRA funds, the Backdoor Roth can be an effective way to build long-term, tax-free retirement savings on an annual basis.