Backdoor Roth IRA
A legal workaround that lets high earners fund a Roth IRA despite income limits, by converting a nondeductible traditional contribution.
A backdoor Roth IRA is a two-step move for people whose income exceeds the Roth IRA contribution limits. You make a nondeductible contribution to a traditional IRA, then convert it to a Roth. Because direct Roth contributions are income-limited but conversions are not, this provides a legal path in.
The wrinkle is the pro-rata rule: if you hold other pre-tax IRA money, the conversion is taxed proportionally across all your IRA balances, which can create an unexpected bill. The cleanest backdoor Roth happens when you have little or no existing pre-tax IRA balance. It's a well-established strategy, but the mechanics reward care.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.