How to Do a Backdoor Roth IRA Without Triggering the Pro-Rata Rule

Execute a backdoor Roth IRA conversion while avoiding the pro-rata rule that taxes your entire traditional IRA balance.

1. Check all your IRA balances. List every traditional IRA, SEP-IRA, and SIMPLE IRA you own across all brokerages. The pro-rata rule looks at your total balance in these accounts on December 31st of the conversion year. Roth IRAs don't count.
2. Clear out existing traditional IRA money. If you have balances in traditional IRAs, roll them into your current employer's 401(k) if allowed. Most employer plans accept rollovers from traditional IRAs. This removes the money from IRA space entirely.
3. Handle SEP and SIMPLE IRAs separately. SEP-IRAs can often be rolled into a 401(k) after you leave that employer. SIMPLE IRAs require a two-year waiting period before rolling to a 401(k). If you can't move these accounts, the pro-rata rule will apply.
4. Make your non-deductible contribution. Once your traditional IRA balance is zero, contribute up to $7,000 to a traditional IRA for 2026 ($8,000 if 50 or older). Take no tax deduction for this contribution since you're over the income limits.
5. Convert immediately to Roth. Convert your non-deductible traditional IRA contribution to a Roth IRA within days or weeks. Since you have no other traditional IRA balances, 100% of the conversion is tax-free.
6. File Form 8606 correctly. Report your non-deductible contribution and conversion on Form 8606 with your tax return. This form tracks your basis in traditional IRAs and calculates the taxable portion of conversions.