What is a backdoor Roth IRA?

A backdoor Roth IRA is a two-step strategy for high earners who exceed the Roth IRA income limits ($161K single / $240K MFJ in 2024). You make a non-deductible contribution to a traditional IRA, then convert it to a Roth IRA shortly after. If you have no other traditional IRA funds, the conversion is essentially tax-free. The pro-rata rule can create a tax complication if you have pre-tax IRA money elsewhere.