A Roth IRA is one of the most useful tools in the tax code. You pay tax on the money going in, and the account then grows tax-free. Qualified withdrawals in retirement aren't taxed at all, and the original owner never has to take required minimum distributions.
There are two ways to put money into a Roth IRA: a contribution and a conversion. They sound similar, but the rules for each are very different. Many people run into trouble because they don't realize which one they made. A third approach, the backdoor Roth, combines the two.
What is a Roth contribution?
A contribution is new money you deposit into a Roth IRA for a particular tax year. It's the annual deposit most people picture when they think of funding an IRA. You don't get a deduction for it; the tax benefit comes later, when withdrawals are tax-free.
Who can contribute
A Roth contribution requires earned income, which the tax code calls compensation. That means wages, salaries, tips, net self-employment income, and a few similar items. Social Security, pensions, IRA distributions, interest, dividends, capital gains, and rental income don't count, however large they are. Your contribution can't be more than your earned income for the year.
There's one important exception: the spousal IRA. A married couple filing jointly can use the working spouse's earned income to fund a Roth for a spouse who has none.
There's no age limit. You can contribute at any age as long as you have earned income.
How much you can contribute
For 2025, the limit is $7,000, or $8,000 if you're 50 or older. For 2026, the limit is $7,500, and the catch-up for age 50 and older is $1,100, for a total of $8,600. The limit covers all your IRAs together. It isn't a separate limit for each account.
Income limits
Direct Roth contributions phase out at higher incomes, based on modified adjusted gross income (MAGI). Within the range you can make a reduced contribution. Above it, you can't contribute directly at all.
| Filing status | 2025 phase-out | 2026 phase-out |
|---|---|---|
| Single or head of household | $150,000 to $165,000 | $153,000 to $168,000 |
| Married filing jointly | $236,000 to $246,000 | $242,000 to $252,000 |
| Married filing separately (lived with spouse) | $0 to $10,000 | $0 to $10,000 |
When to contribute
Contributions for a tax year can be made any time during that year and up to the filing deadline the following April. For 2026, the deadline is April 15, 2027. Extending your tax return doesn't extend the contribution deadline. When you contribute between January 1 and April 15, tell your custodian which year the contribution is for.
What is a Roth conversion?
A conversion moves money you already have in a pre-tax retirement account into a Roth IRA. The source can be a traditional IRA, a SEP IRA, a SIMPLE IRA (after two years of participation), or an old employer plan such as a 401(k). It isn't new money. It's a change in how existing money is taxed.
The tax cost
The amount you convert is added to your taxable income for the year, to the extent it has never been taxed. If your traditional IRA was funded with deductible contributions, the entire conversion is taxable. After that, the money grows in the Roth tax-free.
Who can convert
Anyone. There's no income limit and no earned-income requirement, and there has been none since 2010. A retiree with no wages at all can convert.
The most common misunderstanding about Roths: the earned-income requirement and the income limits apply only to contributions. They don't apply to conversions.
How much you can convert
There's no limit. You can convert $5,000 or $500,000. Many people convert in smaller amounts over several years to keep each year's income in a lower tax bracket.
When to convert
A conversion counts for the year in which the money leaves the traditional account, so it has to be done by December 31. There's no extension into April. A conversion also can't be undone. Recharacterizing a conversion hasn't been allowed since 2018, so be sure of your decision before you make it.
Things to watch
Once you reach required minimum distribution age (73 under current law), you have to take that year's RMD before converting; the RMD itself can't be converted. It's usually best to pay the tax on a conversion from outside the IRA, since tax withheld from the conversion doesn't grow in the Roth. If you're under 59½, withholding can also trigger a 10% penalty.
The extra income can make more of your Social Security taxable. It can also raise your Medicare premiums through IRMAA, which is based on your income from two years earlier. Each conversion also starts its own five-year clock, which only affects you if you withdraw converted funds before age 59½.
Contribution vs. conversion at a glance
| Contribution | Conversion | |
|---|---|---|
| Source of money | New money | Existing pre-tax retirement funds |
| Earned income required | Yes | No |
| Income limits | Yes | No |
| Annual dollar limit | $7,500, or $8,600 at 50+ (2026) | None |
| Deadline | Tax-filing deadline the following April | December 31 |
| Taxable when made | No (and no deduction) | Yes, except any after-tax basis |
| Reported on Form 5498 | Box 10 | Box 3 |
The backdoor Roth
High earners can't contribute to a Roth directly. But anyone with earned income can make a nondeductible contribution to a traditional IRA, and anyone can convert. The backdoor Roth uses both of those rules.
How it works
- Contribute to a traditional IRA and take no deduction. Because that money has already been taxed, it becomes your "basis."
- Convert the account to a Roth, usually soon afterward so there are few earnings to tax.
The basis converts tax-free, and only the earnings are taxed. The result is essentially the same as a direct Roth contribution. Congress acknowledged the strategy when it passed the 2017 tax law.
A backdoor contribution is still a contribution, so it's subject to the same annual limit and the same earned-income requirement as any other IRA contribution. The backdoor gets around the income limit only.
The pro-rata rule
When you convert, the IRS looks at all of your traditional, SEP, and SIMPLE IRA balances together, as of December 31 of the year you convert. You can't choose to convert only the after-tax dollars.
Say you have $93,000 of pre-tax money in a rollover IRA and add a $7,000 nondeductible contribution. Only 7% of any conversion is tax-free, even if you convert only the new $7,000.
The backdoor works cleanly only when you have no other pre-tax IRA money at year end. Employer 401(k) balances don't count toward the pro-rata calculation, which is why some people roll old IRA money into their current employer's plan before doing a backdoor. Each spouse's calculation is separate.
Reporting
Form 8606 is essential. Part I reports the nondeductible contribution and your basis, and Part II reports the conversion. Without this form, the IRS has no record that you already paid tax on the money. You could end up paying tax on it a second time, and there's a $50 penalty for failing to file.
Common mistakes
Contributing without earned income. This happens often with retirees who convert every year and also make a Roth "contribution." The conversion is fine, but the contribution isn't allowed.
Contributing more than your earned income or the annual limit. Any amount over the limit is an excess contribution.
Forgetting Form 8606 for a nondeductible contribution or a conversion.
Overlooking other IRA balances that trigger the pro-rata rule on a backdoor Roth.
Converting without planning for the tax, or for the effect on Social Security and Medicare premiums.
Assuming the paperwork is right. Custodians sometimes code a transaction incorrectly on Form 5498 or 1099-R. Make sure what they reported matches what you did.
Fixing an excess contribution
An excess contribution is subject to a 6% excise tax every year it stays in the account, reported on Form 5329. The easiest fix is to withdraw the excess, plus the earnings on it, by the due date of your return including extensions (October 15 for most filers). Done on time, there's no 6% tax. You pay income tax only on the earnings, and there's a 10% penalty on them if you're under 59½.
If the deadline has passed, withdrawing the excess still stops the tax for future years. Any earlier years with an excess may need a Form 5329.
The bottom line
A contribution is new money. It requires earned income, is capped each year, and has income limits. A conversion moves existing money. It has no income test and no dollar limit, but it's taxable in the year you do it. The backdoor Roth combines the two so that high earners can use a Roth, as long as they watch the pro-rata rule and file Form 8606.
Planning a conversion or a backdoor Roth?
It's important to know the details before you make a contribution or a conversion. The rules on eligibility, limits, and deadlines are strict, and mistakes can be costly to fix. If you'd like to talk through your situation, please give us a call.
Call us at 303-734-1040
This article is general information based on tax law and IRS limits as of September 2026. It isn't tax, legal, or investment advice for your situation. Limits change each year, so check with your tax professional before acting.