Can You Do a Backdoor Roth Every Year?

A Roth Individual Retirement Arrangement (IRA) serves as a valuable retirement savings tool, allowing contributions with after-tax dollars and enabling qualified withdrawals to be tax-free in retirement. However, the ability to contribute directly to a Roth IRA is subject to specific income limitations set by the Internal Revenue Service. For individuals whose income exceeds these thresholds, a strategy known as a “backdoor Roth” provides an avenue to access the benefits of a Roth IRA. This strategy can be performed every year, offering a recurring opportunity for tax-advantaged savings for those ineligible for direct contributions.

The Mechanics of a Backdoor Roth Contribution

The process of executing a backdoor Roth contribution involves a two-step approach. The first step requires making a non-deductible contribution to a traditional IRA. A non-deductible contribution means that the funds placed into the traditional IRA are made with after-tax money, and no tax deduction is claimed for this contribution on the individual’s tax return.

Individuals can contribute up to the annual IRA contribution limit, which applies across all their traditional and Roth IRA accounts. For instance, in 2025, this limit is $7,000, with an additional $1,000 catch-up contribution permitted for those aged 50 or older, totaling $8,000. Contributions for a given tax year can be made up until the tax filing deadline of the following year, usually April 15th. Once the non-deductible contribution is made to the traditional IRA, the second step involves converting those funds to a Roth IRA.

There are no income restrictions for performing a Roth conversion, which allows this strategy for high-income earners. When only after-tax money is converted, the conversion itself is not a taxable event. However, any investment earnings that accrue on the non-deductible contribution while the funds are in the traditional IRA, prior to conversion, would be subject to taxation upon conversion. This two-part approach allows individuals to effectively move after-tax money into a Roth IRA, bypassing the direct income limits.

Annual Eligibility and Recurring Considerations

Under current tax regulations, there are no specific restrictions preventing an individual from performing a backdoor Roth conversion annually, provided they continue to meet the general requirements of the strategy. This allows for consistent use of the Roth IRA’s tax-free growth and withdrawal benefits. A primary consideration for recurring conversions is the “pro-rata rule,” also known as the IRA aggregation rule. This rule dictates how conversions are taxed when an individual holds both pre-tax and after-tax money across their various IRA accounts.

The pro-rata rule requires that all non-Roth IRA accounts, including traditional, SEP, and SIMPLE IRAs, are treated as a single combined entity for tax purposes. Consequently, if an individual has any pre-tax money in any of these accounts, a Roth conversion cannot selectively draw only from the after-tax contributions. Instead, the taxable portion of the conversion is determined proportionally based on the ratio of pre-tax to after-tax funds across all such aggregated accounts at the end of the year in which the conversion occurs. For example, if 70% of an individual’s total traditional IRA assets are pre-tax and 30% are after-tax, then 70% of any amount converted to a Roth IRA would be taxable, even if the intention was to convert only the after-tax portion.

To avoid or minimize the impact of the pro-rata rule and ensure the conversion of after-tax money remains non-taxable, individuals often consider moving any existing pre-tax traditional IRA funds into an employer-sponsored retirement plan, such as a 401(k) or 403(b), if their plan allows for such “reverse rollovers.” This action, ideally completed before December 31st of the conversion year, can clear the pre-tax balance from IRAs, allowing the backdoor Roth conversion to proceed without a taxable component. It is advisable to execute the conversion shortly after making the non-deductible contribution to minimize any earnings that could accrue and become taxable.

Tax Reporting for Backdoor Roth Conversions

Accurate tax reporting is important for performing a backdoor Roth conversion, ensuring the Internal Revenue Service (IRS) is aware that the converted funds originated from after-tax contributions. The primary tax form used for this purpose is Form 8606, Nondeductible IRAs. This form is filed with an individual’s annual federal income tax return.

Part I of Form 8606 is used to report the non-deductible contributions made to a traditional IRA. This establishes the “basis,” or the amount of money that has already been taxed, preventing it from being taxed again when converted or distributed. Subsequently, Part II of Form 8606 is where the Roth conversion itself is reported. This comprehensive reporting on Form 8606 helps the IRS track the after-tax amounts, distinguishing them from any pre-tax funds that might have been converted and are subject to taxation. Financial institutions issue Form 1099-R to report the conversion, and this information should be used when completing Form 8606.