Short Answer
A backdoor Roth lets a high earner fund a Roth indirectly: you make a nondeductible traditional IRA contribution (no income limit), then convert it to a Roth. The conversion is tax-free only if you hold no other pre-tax IRA money. Under the pro-rata rule of IRC §408(d)(2), the nontaxable share of any conversion equals your after-tax basis divided by the combined year-end value of all your traditional, SEP, and SIMPLE IRAs. If you have a $42,500 pre-tax rollover IRA and convert a $7,500 nondeductible contribution, only $1,125 (15%) comes out tax-free and $6,375 is taxable. You report it all on Form 8606, and the taxable amount lands on line 18.
How This Is Calculated
This calculator runs Form 8606 Part I and Part II using the pro-rata rule of IRC section 408(d)(2). The statute treats all of your traditional, SEP, and SIMPLE IRAs as a single contract, so a conversion pulls a proportional mix of pre-tax and after-tax dollars no matter which account you actually move. The calculation follows five sequential steps. For the full strategy, see our Backdoor Roth IRA Guide.
Step 1: Total Your Basis Confirmed
Form 8606 line 3 adds your nondeductible contribution for this year (line 1) to your basis carried forward from prior years (line 2). This is the total after-tax money in your traditional IRAs - the amount that can come out tax-free.
Step 2: Build the Pro-Rata Denominator Confirmed
Form 8606 line 9 adds three figures: the December 31 value of all traditional, SEP, and SIMPLE IRAs (line 6), any regular distributions taken during the year (line 7), and the amount converted to Roth (line 8). Because line 6 is measured at year-end, emptying your pre-tax IRA before December 31 is what makes a clean backdoor Roth possible.
Step 3: Compute the Basis Ratio Confirmed
Form 8606 line 10 divides your basis (line 5, which equals line 3 here) by the denominator (line 9). The result is rounded to at least three decimal places and is never more than 1.000. This ratio is the fraction of any distribution or conversion that comes out tax-free.
Step 4: Split the Conversion Confirmed
Form 8606 line 11 multiplies the conversion (line 8) by the basis ratio to get the nontaxable portion. Part II line 17 carries that figure, and line 18 subtracts it from the amount converted (line 16) to produce the taxable amount, which flows to Form 1040 line 4b as ordinary income.
Step 5: Carry the Basis Forward Confirmed
Form 8606 line 14 subtracts the basis used this year (the nontaxable portion of conversions and distributions) from total basis (line 3). Whatever is left is your basis going into next year's Form 8606. The estimated federal tax is the taxable conversion multiplied by your marginal rate.
Workplace plans are not in the denominator: The pro-rata rule counts only IRAs - traditional, SEP, and SIMPLE. Money in a 401(k), 403(b), or 457(b) is excluded. That is why rolling a pre-tax IRA into your current employer plan before year-end clears the pro-rata trap and restores a fully tax-free backdoor Roth. Confirmed
The conversion has no income limit: Anyone can convert a traditional IRA to a Roth regardless of income. The only income limit in the backdoor Roth is on a direct Roth contribution, which is exactly the limit the strategy works around by contributing to a traditional IRA first.
Assumptions
- The year-end pre-tax IRA value you enter (line 6) is measured after the conversion is removed, per Form 8606.
- Contributions made between January 1 and April 15 of the following year for this year (line 4) are assumed to be zero, so line 5 equals line 3.
- The basis ratio is rounded to four decimal places (the form requires at least three) and capped at 1.0000.
- Any investment gain between the contribution and the conversion is captured only when the conversion exceeds basis with no other pre-tax IRA money.
- Estimated tax multiplies the taxable conversion by your marginal rate and ignores state tax, bracket crossover, IRMAA, and the net investment income tax.
- The 10 percent early-withdrawal recapture on converted principal (under 59 and a half, within 5 years) is described but not added to the tax estimate.
Frequently Asked Questions
What is a backdoor Roth IRA?
A backdoor Roth IRA is a two-step strategy used by people whose income is above the Roth IRA contribution limit. First you make a nondeductible contribution to a traditional IRA, which has no income limit. Then you convert that traditional IRA to a Roth IRA. Because the contribution was after-tax (nondeductible), the conversion is largely or fully tax-free, provided you do not hold other pre-tax IRA money. You report the nondeductible contribution and the conversion on Form 8606. The IRS has not prohibited the strategy, and Congress has acknowledged it in legislative history.
What is the pro-rata rule for a backdoor Roth?
The pro-rata rule of IRC section 408(d)(2) treats all of your traditional, SEP, and SIMPLE IRAs as one account when you convert. The nontaxable portion of any conversion equals your total after-tax basis divided by the combined year-end value of all those IRAs plus any distributions and conversions during the year. If you hold pre-tax IRA money, only a fraction of your conversion comes out tax-free, even if you only convert the nondeductible contribution. A clean backdoor Roth requires a zero balance in all traditional, SEP, and SIMPLE IRAs at year-end.
How is the taxable amount of a Roth conversion calculated on Form 8606?
On Form 8606, line 9 adds the December 31 value of all your traditional, SEP, and SIMPLE IRAs (line 6) to distributions (line 7) and the amount converted (line 8). Line 10 divides your total basis (line 5) by line 9 to get the basis ratio, rounded to at least three decimal places and capped at 1.000. Line 11 multiplies the conversion (line 8) by that ratio to get the nontaxable portion. In Part II, line 18 subtracts the nontaxable basis (line 17) from the amount converted (line 16) to get the taxable amount, which flows to Form 1040 line 4b.
Why is my backdoor Roth conversion taxable if I only converted my nondeductible contribution?
Because the pro-rata rule ignores which specific dollars you convert. It treats all your traditional, SEP, and SIMPLE IRAs as a single pool of pre-tax and after-tax money. If you have a $42,500 pre-tax rollover IRA and a $7,500 nondeductible contribution, your basis is only 15 percent of the $50,000 total, so only 15 percent of any conversion is tax-free. Converting your $7,500 makes $1,125 nontaxable and $6,375 taxable, and your remaining basis carries forward on Form 8606 line 14. The pre-tax IRA must be empty at year-end to get a fully tax-free backdoor Roth.
How do I avoid the pro-rata rule on a backdoor Roth?
You avoid it by having a zero balance in all traditional, SEP, and SIMPLE IRAs on December 31 of the conversion year, because the pro-rata ratio uses the year-end value. The most common fix is to roll any pre-tax IRA money into your current employer 401(k) or 403(b), since workplace plans are not counted in the pro-rata calculation. Once the pre-tax IRA is emptied, your nondeductible contribution is your only IRA basis, the basis ratio is 1.000, and the conversion is fully nontaxable except for any investment gains earned before you convert.
What happens if I do not file Form 8606?
Form 8606 is how you tell the IRS that a contribution was nondeductible and that you have after-tax basis. Failing to file it when required carries a $50 penalty, and overstating your basis carries a $100 penalty, but the larger cost is losing the record of your basis. Without a filed Form 8606, the IRS treats the money as fully pre-tax, and the same dollars you already paid tax on get taxed again at withdrawal or conversion. Keep every Form 8606 permanently; it is one of the few tax records you should never discard.
Do gains on the contribution make my backdoor Roth taxable?
Yes, any earnings between the contribution and the conversion are pre-tax and become taxable on conversion. If you contribute $7,500 and it grows to $7,560 before you convert, the $60 of gain is taxable even in an otherwise clean backdoor Roth. Most people minimize this by converting promptly after the contribution clears, leaving little time for gains. This calculator captures the gain effect when you enter a conversion amount larger than your basis with no other pre-tax IRA money.
Is there a five-year clock on a backdoor Roth conversion?
Yes. Under IRC section 408A(d)(3)(F), each Roth conversion starts its own five-year clock. If you withdraw the converted principal before five years have passed and before age 59 and a half, a 10 percent recapture penalty applies to the part of the conversion that was taxable. The clock begins on January 1 of the year of the conversion, so a December conversion still counts the whole year. The five-year conversion clock is separate from the five-year clock that determines whether Roth earnings are tax-free.
What are the Roth IRA income limits for 2026?
For 2026 the Roth IRA contribution phase-out is $153,000 to $168,000 of modified AGI for single and head of household filers, and $242,000 to $252,000 for married filing jointly (for 2025 it was $150,000 to $165,000 and $236,000 to $246,000). Above the top of the range you cannot contribute directly to a Roth, which is exactly when the backdoor Roth becomes useful: you contribute to a traditional IRA, which has no income limit, then convert. Conversions themselves have no income limit.
What To Do Next
If You Have No Other Pre-Tax IRA Money
You are clear for a clean backdoor Roth. Make the nondeductible contribution, convert promptly to limit gains, and file Form 8606 for the year. Confirm whether a direct Roth is even off the table first by checking your income against the limit.
If You Hold a Pre-Tax Rollover, SEP, or SIMPLE IRA
The pro-rata rule will tax most of your conversion. If your current employer 401(k) accepts rollovers, move the entire pre-tax IRA into it before December 31, then do the backdoor Roth clean. Model the difference above before deciding.
For the Full Strategy
Read the Backdoor Roth IRA Guide for the step-by-step workflow, the pro-rata fix, the Form 8606 walkthrough, the two five-year clocks, and the mega backdoor Roth.