High-income earners can use the Backdoor Roth IRA strategy to contribute funds to a self-directed Roth IRA. The Backdoor Roth is a popular workaround to the rules which restrict high-income earners from making annual Roth contributions to a Roth IRA.
A Backdoor Roth IRA is a popular strategy among high-income earners wanting to contribute to a Roth IRA but who are limited by income restrictions. The Backdoor Roth IRA is not a type of IRA, it is the process of converting annual non-deductible Traditional IRA contributions to a Roth IRA.
Many high-income earners believe that they can’t contribute to a Roth IRA because they make too much money and/or because they participate in a company 401(k) plan. This is not true! For taxpayers with incomes exceeding $168,000 ($252,000 married), direct contributions to a Roth IRA are off-limits. However, the “backdoor” Roth IRA strategy allows you to make non-deductible Traditional IRA contributions and then convert those funds into a Roth IRA.
Keep in mind, if you have any traditional IRA funds, those must be converted in order to utilize the backdoor Roth IRA strategy. Directed IRA provides the account strategy for individuals looking to implement the Backdoor Roth IRA strategy with their Self-Directed IRAs (SDIRA).
Use Our Backdoor Roth Account Package
• A Backdoor Roth IRA contains three parts: A Traditional IRA account, a Roth IRA account, and a Roth Conversion Request.
• Fill out a new account application or book a call for assistance from a team member.
• Caution: If you have existing Traditional IRA funds those must be converted first.
Make Non-Deductible Contributions to Your Traditional IRA
• Make a new contribution to your Traditional IRA. You will report the contribution as non-deductible on your 1040 tax return (work with you accountant on this).
Convert Funds to Your Roth IRA
• Convert non-deductible funds from your Traditional IRA to your Roth IRA at Directed IRA. Log in to submit a conversion form. There is no tax for this conversion.
• Caution: Consult with your tax professional to ensure that you properly report this conversion on form 8606 of your personal return.
Start Investing
• Account holders at Directed IRA can invest in any asset allowed by law. This includes alternative assets like real estate, precious metals, private equity, and more.
When to use the Backdoor Roth strategy will depend on your income limits and whether you qualify for a standard Roth IRA contribution based on IRS guidelines and your income. See the IRS limits below (as of 2026).
The IRS sets annual contribution limits for IRAs. For 2026 this is $7,500 and for those 50 and older it is $8,600. For the most current limits, please refer to the IRS guidelines or consult your tax advisor.
Yes, anyone with earned income can take advantage of the Backdoor Roth IRA, especially if their income exceeds the limits for direct Roth IRA contributions. Keep in mind that if you have deductible traditional IRA funds (you got a deduction when contributing) that you must also convert those funds when doing the back door Roth IRA and doing your annual non-deductible contribution.
This Backdoor Roth is ideal for individuals whose income exceeds the limits for direct Roth IRA contributions. It’s especially beneficial for those seeking tax-free growth and withdrawals in retirement, and who are comfortable navigating the conversion process.
When you convert non-deductible traditional contributions to Roth there is no tax due on the conversion as you did not take a deduction when you just made the contribution. This needs to be reported properly on your 1040 personal return using form 8606. All future earnings in the Roth IRA will grow tax-free, and qualified withdrawals can be taken tax-free in at age 59 ½.
Yes. Keep in mind that your Traditional IRA balance may impact the taxability of your conversion through the IRS’s pro-rata rule. This rule requires you to calculate taxes based on the ratio of pre-tax and after-tax contributions across all your Traditional IRAs. Most people who utilize the Back door Roth IRA do this after converting their regular deductible traditional IRA dollars first. If you have traditional 401(k) dollars those do not need to be converted, and some people will move traditional IRA funds (deductible) to their solo 401(k) or other 401(k) to avoid the pro-rata rules and the requirement to convert those traditional IRA deductible dollars.
A Self-Directed Backdoor Roth IRA allows for a much wider variety of investment options than a Brokerage IRA (regular IRA). IRA custodians like Directed IRA allow account holders to invest both their Traditional and Roth dollars into “alternative assets” like real estate, private equity, precious metals, startups, and more. That’s why utilizing the Backdoor Roth strategy is so powerful within a Self-Directed IRA.
While the strategy is IRS-compliant, it requires meticulous record-keeping and accurate tax filing to avoid penalties. Additionally, the IRS’s pro-rata rule may result in unexpected tax liabilities if you have other Traditional IRA balances.
No, as of 2018, Backdoor Roth IRA conversions are irreversible (see Tax Cuts and Jobs Act (Pub. L. No. 115-97)). The amount you convert will be taxed in the year of conversion, so it’s important to plan ahead for the associated tax implications. Once you place a conversion from your Traditional IRA to Roth, you cannot un-do the process.
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Mat Sorensen, Attorney, CEO, and Founder of Directed IRA, wrote the #1 book on self-directed IRAs – selling over 50,000 copies nationwide. The Self Directed IRA Handbook is a comprehensive guide written for both investors and advisors alike. Get access to your SDIRA Handbook resources today!
Mat Sorensen, Attorney, CEO, and Founder of Directed IRA, wrote the #1 book on self-directed IRAs – selling over 50,000 copies nationwide. The Self Directed IRA Handbook is a comprehensive guide written for both investors and advisors alike. Download your free copy today!
