Backdoor Roth IRA Step-by-Step for H1B Holders

A backdoor Roth IRA is a nondeductible traditional IRA contribution, converted to a Roth shortly after — a workaround for anyone whose income is above the direct Roth contribution limit. The mechanics are simple in principle and easy to mess up in practice, mostly because of one rule: the pro-rata rule, which taxes your conversion based on all your traditional IRA money, not just the new contribution.

Who actually needs this

For 2026, direct Roth IRA contributions phase out between $153,000 and $168,000 MAGI for single filers, and between $242,000 and $252,000 for married couples filing jointly. Above those ceilings, you can’t contribute to a Roth IRA directly at all — the backdoor route is the only way in.

The steps

1. Check for existing pre-tax IRA money. Add up any traditional, SEP, or SIMPLE IRA balances you hold anywhere, as of December 31 of the year you plan to convert. If that total is zero, skip to step 3 — you’re set up for a “clean” backdoor.
2. If you have pre-tax IRA money, consider rolling it into a 401(k) first. Most employer 401(k) plans accept incoming rollovers from traditional IRAs. Doing this before you convert removes that balance from the pro-rata calculation entirely, since 401(k) balances aren’t counted in the IRA aggregation rule.
3. Contribute to a nondeductible traditional IRA. The limit is $7,500 for 2026 ($8,600 if you’re 50 or older, using the $1,100 catch-up).
4. Convert the traditional IRA balance to a Roth IRA. Do this reasonably promptly — any investment growth between the contribution and the conversion is taxable, since only your original nondeductible contribution counts as already-taxed basis.
5. File Form 8606 for both the contribution year and the conversion year. This is the paper trail that proves to the IRS how much of the money was already taxed.

A worked example — the pro-rata rule in action

Arjun, single, has a rollover traditional IRA worth $50,000 from a 401(k) he consolidated after switching jobs on his way to a green card. His 2026 MAGI is $190,000 — well above the Roth phase-out ceiling, so a backdoor Roth is his only path to a Roth IRA.

He contributes $7,500 to a new nondeductible traditional IRA and converts it the same week. The pro-rata rule doesn’t let him treat that $7,500 in isolation. Instead:

• Total IRA money as of Dec. 31: $50,000 (pre-tax) + $7,500 (new after-tax basis) = $57,500
• Taxable percentage of the conversion: $50,000 ÷ $57,500 = 87%
• Taxable amount on his $7,500 conversion: 87% × $7,500 = $6,525, taxed as ordinary income

He ends up paying tax on $6,525 of a $7,500 conversion — not the clean, tax-free conversion he expected. If he’d rolled that $50,000 rollover IRA into his current employer’s 401(k) before converting (assuming the plan accepts incoming rollovers, which most do), his pro-rata percentage would have dropped to roughly 0%, and the conversion would have been close to tax-free.

Why this is often cleaner for immigrants than for US-born high earners

A lot of backdoor Roth guidance online is written for someone in their 40s or 50s with a decade-plus of pre-tax IRA rollovers sitting around, which is exactly what triggers a high pro-rata percentage. Many H1B holders arrive with no prior US retirement accounts at all — no old employer 401(k)s to roll over, no SEP-IRA from a previous business. If that’s you, your pro-rata percentage starts at or near zero by default, and the backdoor Roth really can be close to tax-free without any extra rollover maneuvering. The catch is doing it before you accumulate a rollover IRA from a job change, not after.

Use the calculator above to check your own eligibility and estimate your pro-rata tax hit before you convert. If you’re already maxing this out and your 401(k) plan allows after-tax contributions, the Mega Backdoor Roth is the next lever worth checking.