Backdoor and mega-backdoor Roth — and the pro-rata trap

Last reviewed July 2026 · 5 min read

Roth IRAs have income limits: for 2026, the ability to contribute directly phases out between $153,000 and $168,000 of MAGI for single filers and between $242,000 and $252,000 for married couples filing jointly. But two things have no income limit at all — making a nondeductible contribution to a traditional IRA, and converting a traditional IRA to a Roth. Chain them together and you have the backdoor Roth: a legal, widely used way for high earners to fund a Roth IRA anyway. The mechanics are simple. The trap — the pro-rata rule — is not.

The basic backdoor, step by step

Contribute to a traditional IRA (for 2026, up to $7,500 per person, plus a $1,100 catch-up at 50+), claiming no deduction. Then convert the balance to a Roth IRA, ideally promptly, before meaningful earnings accrue. Because the contribution was already-taxed money — “basis” — converting it triggers little or no additional tax. You report both halves on Form 8606, which tracks nondeductible basis year over year. Congress’s tax writers have acknowledged the maneuver in legislative history, and the once-feared step-transaction argument against it has faded; there is no required waiting period between contribution and conversion.

The pro-rata trap

Here is where clean theory meets messy accounts. For conversion purposes, the IRS treats all of your traditional, SEP, and SIMPLE IRAs as one pot, measured on December 31 of the conversion year. You cannot choose to convert “just the after-tax dollars.” Every conversion carries pre-tax and after-tax money out in proportion to the whole pot.

Example: you make a $7,500 nondeductible contribution, but you also have a $67,500 pre-tax rollover IRA from an old job. Your IRA pot is $75,000, of which only 10% is basis. Convert $7,500 and only $750 of it is tax-free — the other $6,750 is ordinary income, while $6,750 of your basis stays stranded in the IRA. The standard fix is to empty the pre-tax pot before December 31: roll the pre-tax IRA into your current employer’s 401(k) (employer plans are outside the pro-rata pot), leaving the IRA holding only basis. Spouses are measured separately — one spouse’s rollover IRA does not contaminate the other’s backdoor.

The mega-backdoor Roth

A second, larger door exists inside some 401(k) plans. The employee deferral limit for 2026 is $24,500 (plus $8,000 catch-up at 50+), but the overall limit on all 401(k) additions — employee, employer, and after-tax — is $72,000 under §415(c). If your plan permits non-Roth after-tax contributions, the space between your deferrals-plus-match and $72,000 can be filled with after-tax dollars and then moved to Roth, either by in-plan conversion or by rolling to a Roth IRA. IRS Notice 2014-54 blessed the key mechanic: after-tax contributions can be split off and sent to the Roth side while their earnings go to a traditional account, or you simply convert quickly so earnings are minimal. Two plan features are required — after-tax contributions and either in-plan Roth conversion or in-service distributions — and many plans lack them, so check yours before counting on it.

Housekeeping that matters

File Form 8606 every year you make a nondeductible contribution or convert — missing it is how basis gets taxed twice. Watch the pro-rata snapshot date: a pre-tax rollover into an IRA late in the year can retroactively poison a conversion done in January. And remember converted dollars carry their own 5-year clock for penalty-free withdrawal before 59½.

Try it in Deorbit Plan

Open the Income & Savings panel, which has dedicated annual fields for Backdoor Roth IRA (household total, capped by the 2026 $7,500-per-person limit) and Mega-backdoor Roth (after-tax 401(k) → Roth, capped by the $72,000 §415(c) total). Both flow into Roth basis in the simulation, so decades later the Year table shows those dollars coming out with no tax, no effect on Social Security taxability, and no MAGI footprint on the Tax & MAGI chart — the payoff the whole maneuver exists for.

Educational content only — not financial, tax, or investment advice.

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