A backdoor Roth IRA is a strategy where high-income earners who exceed Roth IRA income limits contribute to a traditional IRA (non-deductible) and then immediately convert it to a Roth IRA. This effectively allows anyone to fund a Roth IRA regardless of income level.
In 2026, direct Roth IRA contributions phase out for individuals with MAGI above $150,000 and are eliminated above $165,000 (approximately). For married couples, the phase-out is $236,000-$246,000. Many Northern Suburbs professionals exceed these limits, which is where the backdoor strategy applies.
The two-step process: first, make a non-deductible traditional IRA contribution (up to $7,000 in 2026, or $8,000 if 50+). Non-deductible means you get no tax deduction, the contribution is after-tax. Second, immediately convert that traditional IRA to a Roth IRA. Because the contribution was after-tax, you owe zero income tax on the conversion (you already paid tax on those dollars). The Roth IRA then grows tax-free.
The pro-rata rule is the critical complication. If you have other pre-tax traditional IRA balances (rollover IRA, SEP IRA, SIMPLE IRA), the IRS requires you to calculate your conversion tax proportionally across all IRA balances, not just the new contribution. For example, if you have $90,000 in a pre-tax IRA and add $10,000 non-deductible, a $10,000 conversion is treated as 90% pre-tax (taxable) and 10% after-tax (tax-free). The backdoor only works cleanly if you have no other pre-tax traditional IRA balances, or roll them into your employer's 401k first.
Illinois doesn't tax IRA distributions, which means the backdoor Roth conversion has no Illinois state tax consequence, only the federal pro-rata calculation applies to state residents. This is another favorable feature of the Illinois tax environment for Northern Suburbs high-income earners executing this strategy.
Key facts
- 2026 Roth IRA income phase-out: $150,000-$165,000 for single filers; $236,000-$246,000 for married filing jointly
- Backdoor contribution limit: same as regular IRA, $7,000 (under 50), $8,000 (50+) in 2026
- Pro-rata rule: if you have pre-tax IRA balances, the conversion is partially taxable, proportional to your total pre-tax vs. after-tax IRA basis
- Solution to pro-rata rule: roll pre-tax IRA funds into a 401k (if the plan accepts incoming rollovers) before executing the backdoor
- Illinois doesn't tax IRA distributions, no state tax on the Roth conversion for Illinois residents
- Mega backdoor Roth: a separate strategy for after-tax 401k contributions, up to $46,500 additional after-tax 401k contributions converted to Roth 401k or IRA, if the plan allows
Is the backdoor Roth IRA still legal?
Yes, as of 2026, the backdoor Roth IRA is legal and well-established. The IRS has acknowledged the strategy, and the non-deductible IRA contribution followed by conversion has been a recognized technique for years. Legislative proposals to eliminate backdoor strategies have been discussed but not enacted. We monitor any legislative changes that could affect this strategy.
What is the mega backdoor Roth and how is it different?
The mega backdoor Roth allows high earners to contribute up to $46,500 in after-tax funds to a 401k (beyond the regular pre-tax limit) and then convert those after-tax contributions to a Roth 401k or roll them to a Roth IRA. Not all 401k plans allow after-tax contributions or in-service withdrawals, the strategy requires a plan that explicitly permits both. When available, the mega backdoor dramatically increases annual Roth contribution capacity.