The Step-by-Step Process for Converting After-Tax Dollars to a Roth IRA

How to execute a backdoor Roth conversion in four steps

A backdoor Roth works in two parts: you contribute after-tax money to a traditional IRA, then convert that money to a Roth IRA. The IRS allows this because you are moving money you have already paid income tax on, so the conversion itself is not a taxable event. The actual mechanics are straightforward—you open accounts if you don't have them, deposit the money, request the conversion, and file a form with your tax return.

The timing matters more than the complexity. You must complete the conversion in the same calendar year you make the non-deductible contribution, or the money sits in a traditional IRA earning income that becomes taxable. Most people do both steps within days of each other to avoid this trap.

Key Takeaways

• Contribute after-tax money to a traditional IRA first, then convert it to a Roth IRA within the same calendar year.
• File Form 8606 with your tax return to report the non-deductible contribution and the conversion.
• If you have other traditional IRAs, SEP-IRAs, or SIMPLE IRAs with pre-tax balances, the pro-rata rule may create a tax bill on part of your conversion.
• The conversion itself is not a taxable event, but any earnings that accumulated between contribution and conversion are taxable income in the year you convert.

Step 1: Contribute after-tax money to a traditional IRA

Open a traditional IRA if you don't already have one. You can do this at any brokerage—Fidelity, Vanguard, Charles Schwab, or your bank. The account setup takes minutes online.

Deposit the money you want to convert. For 2024, you can contribute up to $7,000 to a traditional IRA ($8,000 if you are 50 or older). This contribution is after-tax money—you are not deducting it from your income. The brokerage will ask whether the contribution is deductible or non-deductible; select non-deductible.

Do not invest the money yet. Leave it in cash or a money market fund while it sits in the traditional IRA. This prevents earnings from accumulating before the conversion, which would create a tax bill.

Step 2: Open a Roth IRA if you don't have one

You need a separate Roth IRA account to receive the converted money. Open it at the same brokerage where you opened the traditional IRA, or at a different one—it does not matter. The account setup is identical to opening any IRA.

You do not need to fund the Roth IRA yourself. The money will arrive from the traditional IRA during the conversion step.

Step 3: Request the conversion from your brokerage

Contact the brokerage holding your traditional IRA and request a conversion to your Roth IRA. Most brokerages let you do this online through your account dashboard. Search for "convert to Roth" or "Roth conversion" in the help section. Some require a phone call or a form.

Specify the exact dollar amount you want to convert. You can convert the full amount you just contributed, or a portion of it. Most people convert everything at once to keep the paperwork simple.

The brokerage will move the money from the traditional IRA to the Roth IRA. This usually takes one to three business days. The money is now in your Roth IRA and subject to Roth rules—no required withdrawals during your lifetime, and may have access to withdrawals are tax-free.

Step 4: Report the conversion on your tax return

File Form 8606 (Nondeductible IRAs) with your federal tax return for the year you made the contribution and conversion. This form tells the IRS that you contributed after-tax money and converted it.

Form 8606 has two parts. Part I reports the non-deductible contribution. Part II reports the conversion. You will need the amount you contributed and the amount you converted (usually the same number). Your brokerage will send you a 1099-R form showing the conversion; use that to fill in Form 8606.

File the form even if you owe no tax on the conversion. The IRS uses it to track your basis in traditional IRAs, which matters if you convert again in future years.

The pro-rata rule: when your conversion creates a tax bill

If you have any traditional IRAs, SEP-IRAs, or SIMPLE IRAs with pre-tax money in them, the pro-rata rule applies. The IRS treats all your IRAs as one pool for tax purposes. When you convert, you must convert a proportional mix of pre-tax and after-tax money.

Example: You have a traditional IRA with $90,000 of pre-tax money (from a rollover or deductible contributions). You contribute $10,000 of after-tax money to a second traditional IRA and convert it. The pro-rata rule says 90 percent of your conversion is pre-tax money, so $9,000 of the $10,000 you convert is taxable income. You owe income tax on that $9,000 in the year of conversion.

The pro-rata rule applies to the total of all your traditional, SEP, and SIMPLE IRAs combined. It does not apply to 401(k)s, 403(b)s, or other employer plans—those are separate. If you have pre-tax money in an IRA and want to do a backdoor Roth, consider rolling the pre-tax IRA balance into your employer plan (if your plan accepts rollovers) before you convert. This removes the pre-tax money from the pro-rata calculation.

Timing: when to do each step

The contribution and conversion must happen in the same calendar year. If you contribute in December 2024 and convert in January 2025, the IRS treats them as separate tax years, and the money sits in a traditional IRA earning taxable income in 2024.

Most people complete both steps within a few days. Contribute on a Monday, request the conversion on Tuesday, and the money arrives in the Roth IRA by Thursday. This minimizes the time the money sits in the traditional IRA earning interest or dividends.

You have until the tax filing deadline (usually April 15 of the following year) to file Form 8606, but the contribution and conversion themselves must be completed by December 31.

Common mistakes to avoid

Do not leave money in the traditional IRA after contributing. Any interest, dividends, or capital gains that accumulate between contribution and conversion are taxable income in the year you convert. If you contribute $10,000 and it earns $50 in interest before conversion, you owe income tax on that $50.

Do not forget Form 8606. Without it, the IRS may assume your contribution was deductible, and you could face a double-tax situation: you already paid tax on the money when you earned it, and the IRS taxes it again on conversion. Filing the form prevents this.

Do not assume you can do a backdoor Roth if you have pre-tax IRA money and ignore the pro-rata rule. The rule applies automatically; you cannot opt out. If you have a large pre-tax IRA balance, consult a tax professional before converting.

Frequently Asked Questions

Can I do a backdoor Roth if I have a 401(k) at work?

Yes. The pro-rata rule applies only to IRAs, not to 401(k)s, 403(b)s, or other employer plans. If your pre-tax money is in a 401(k), it does not affect your backdoor Roth conversion. You can contribute and convert without a tax bill.

What if I already have a Roth IRA with money in it?

You can still do a backdoor Roth. The conversion deposits into your existing Roth IRA. There is no limit on how many conversions you can do or how much total money can be in a Roth IRA.

How long does the conversion take?

The brokerage usually moves the money within one to three business days. Form 8606 is filed with your tax return, which can be months later. The conversion itself is complete once the money arrives in the Roth IRA.

Can I convert only part of my traditional IRA?

Yes. You can convert $5,000 and leave $5,000 in the traditional IRA. However, the pro-rata rule still applies to the portion you convert. If you have pre-tax money in any IRA, part of your conversion will be taxable.

What if my income is too high for a Roth IRA?

Income limits apply to direct contributions to a Roth IRA, but not to conversions. You can convert any amount regardless of income. This is why the backdoor Roth exists—it is the workaround for high earners who cannot contribute directly.