The Backdoor Roth IRA Move High Earners Use to Get $7,500 of Tax-Free Money Past the Income Cap

"For 2026, the Roth IRA contribution phase-out for married filing jointly runs from $242,000 to $252,000 of modified adjusted gross income. At $310,000, the couple is fully phased out. The traditional IRA, however, carries no income cap on contributions themselves, only on whether those contributions are deductible. That single distinction is the entire game."

"Each spouse opens or reuses a traditional IRA and contributes $7,500 of after-tax cash. Because the household income is above the deduction threshold and both spouses are covered by a workplace plan, the contribution is non-deductible. They file Form 8606 with that year's return to establish basis. The next business day, each spouse converts the full traditional IRA balance to a Roth IRA."

"Because the contribution was already taxed and the cash has had no time to earn anything, the conversion itself produces almost no tax bill. The household just routed $15,000 of new money into Roth status that the income rules were designed to block. When each spouse turns 50, the IRA catch-up of $1,100 per person lifts the household total to $17,200 a year of fresh Roth contributions."

"Here is where the move blows up if you skip a step. The IRS will not let you cherry-pick which dollars convert. If either spouse holds other pre-tax IRA balances on December 31 of the conversion year (a rollover IRA from an old 401(k), a SEP-IRA from a side business, a SIMPLE IRA), the conversion is taxed pro-rata across the aggregate IRA balance."

Roth IRA contributions phase out for married filing jointly between $242,000 and $252,000 of modified adjusted gross income in 2026, so a $310,000 household is fully phased out. Traditional IRA contributions have no income cap, but deductibility depends on income and whether a spouse is covered by a workplace retirement plan. The strategy uses non-deductible traditional IRA contributions of $7,500 per spouse, reported on Form 8606 to establish basis. The next business day, each spouse converts the traditional IRA balance to a Roth IRA, producing little tax because the money was already taxed and has not had time to grow. If either spouse has other pre-tax IRA balances at year-end, conversions are taxed pro-rata across all IRA holdings, which can substantially reduce or eliminate the benefit.

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