A Roth IRA is one of the most powerful retirement accounts available (and one of my personal favorites). It grows tax-free and withdrawals are tax-free in retirement.
But there’s a catch: income limits.
For 2026, you can contribute up to $7,500 ($8,600 if age 50+) to your Roth IRA if your Modified Adjusted Gross Income (MAGI) is under $153,000 (single) or $242,000 (married filing jointly).
If your income exceeds $168,000 (single) or $252,000 (married filing jointly), you’re ineligible to contribute directly.
That’s where the Backdoor Roth IRA comes in as a strategy for high-income earners to contribute indirectly.
Step-by-Step: How the Backdoor Roth Works
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Eliminate Traditional IRA balances
– Before December 31, 2026, roll over all Traditional, Rollover, SEP, and SIMPLE IRAs into a 401(k) or 403(b). – These accounts must be $0 by 12/31/26 as this avoids the pro-rata rule, which can otherwise create an unwanted tax bill.
Another reason why I love the Solo 401(k) over the SEP IRA for business owners. It allows for the Backdoor Roth while the SEP does not!
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Make a non-deductible Traditional IRA contribution
Contribute up to $7,500 for 2026 ($8,600 if 50+). You or your spouse must have earned income to do so.
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Wait for funds to settle
– Allow a day or a few days for the contribution to clear before converting.
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Convert to a Roth IRA
– Convert the balance to your Roth IRA. Select “no tax withholding” during the process.
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Invest the funds
– Once converted, make sure to invest your funds within the Roth IRA.
Timing & Tax Considerations
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Complete both the contribution and conversion within the same calendar year for a clean conversion.
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Report the transaction on Form 8606 when filing your tax return.
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If done correctly, line 4b on your Form 1040 should show $0 in taxable income (or a few dollars of growth)
Why You Should Consider a Backdoor Roth IRA in 2026
A Backdoor Roth IRA allows high-income earners to build retirement savings that grow tax-free for life, even when direct Roth contributions aren’t allowed due to income limits. It remains one of the most powerful long-term tax-planning strategies available.
Many of my business-owner clients completed their 2025 Backdoor Roth conversions, and now is a great time to start 2026 right. I’m happy to walk you through the process and coordinate the necessary rollover steps to ensure it’s done correctly or take a look here!
B. Riley Wealth Management, Inc. and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Securities and variable insurance products are offered through B. Riley Wealth Management, Inc., member FINRA/SIPC.
Fee-based advisory services offered through B. Riley Wealth Advisors, Inc., an SEC-registered investment advisor.
Fixed insurance products offered through B. Riley Wealth Insurance.
