If you earn too much to contribute to a Roth IRA directly, there's a legal workaround that thousands of Americans use every year.
It's called the backdoor Roth IRA, and despite the name, nothing about it is shady.
It's simply a two-step move that the IRS allows.
You contribute to a traditional IRA, then convert that money into a Roth IRA.
Because traditional IRA contributions can be made regardless of income, this lets high earners get money into a Roth account even when they're above the direct contribution limits.
For 2025, the income phase-out for direct Roth contributions starts at $150,000 for single filers and $236,000 for married couples filing jointly.
Above those thresholds, a direct contribution isn't allowed.
That's where the backdoor approach comes in.
If you already have money sitting in a traditional IRA, SEP IRA, or SIMPLE IRA, the IRS looks at all of it together when calculating taxes on the conversion.
You can't just convert the new money and leave the old balance alone.
Say you have $50,000 in a traditional IRA and you contribute $7,000 with the intent to convert it.
Under the pro-rata rule, only about 12% of your conversion would be tax-free.
That's why financial planners often tell people to check existing IRA balances before trying this.
If your employer's 401(k) plan allows it, you can roll your traditional IRA money into the 401(k) first.
That clears out the pre-tax IRA balance and makes the backdoor conversion cleaner.
Not every plan allows this, so it's worth a call to your HR department or plan administrator.
The mechanics themselves are straightforward.
You open a traditional IRA, contribute after-tax dollars, and then convert the balance to a Roth IRA.
You'll owe taxes only on any earnings that happened between contribution and conversion, which is usually a few dollars or nothing if you move quickly.
You'll get a Form 1099-R for the conversion and you'll need to file Form 8606 to track your after-tax basis.
Miss that step and you could end up paying taxes twice on the same money.
Tax software usually handles this, but it's easy to overlook.
One more thing to know: the IRS has never explicitly blessed the backdoor Roth, but it also hasn't challenged it.
Congress closed the backdoor for Roth conversions in 2022, but that provision was removed before it took effect.
As of now, the strategy remains available.
Primarily people who max out their 401(k), want tax-free growth in retirement, and don't have a large pre-tax IRA balance in the way.
If you're in that group, the math often works in your favor over a long time horizon.
This isn't a loophole that requires a lawyer or a secret handshake.
It's a documented strategy with clear rules, and the main risk is a tax surprise from the pro-rata calculation if you don't plan ahead.
Run the numbers or talk to a tax pro before you convert, especially if you have an existing IRA balance.
Final Thoughts
A little homework now can save you a headache in April.