Can I Contribute to an IRA and Convert to a Roth if I Am Over the Income Limit?

Income limits are an inconvenience, not a barrier, to putting money in a Roth IRA.

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On the surface, the income limits for Roth IRA contributions make it look like you can't get money into a Roth IRA if you make too much money. However, through a backdoor, you can still get money into a Roth IRA without incurring any penalties no matter how much you make.

No Conversion Income Limits

Since 2010, the IRS has not imposed income limits on who can convert from a traditional IRA to a Roth IRA. In addition, the IRS has never placed a time limit on how long the money must stay in a traditional IRA before you can convert it to a Roth IRA. As a result, the removal of the income limits allows everyone to contribute to a traditional IRA and then immediately convert to a Roth IRA.

Tax Effects

When you convert from a traditional IRA to a Roth IRA, you have to include the amount of the conversion that you would have been taxed on had you taken the money as a distribution. For example, if you converted $5,000 from a traditional IRA to a Roth IRA, and the entire distribution would have been taxable if you had taken it as a distribution, you would have to include that $5,000 as taxable income in the year of the conversion.

Nondeductible Contribution Effects

If you make nondeductible contributions to your traditional IRA, you create a basis in the account. If you took a distribution from the account, you would not have to pay income taxes on the portion of the distribution that comes from the nondeductible contributions. Similarly, when you convert from a traditional IRA to a Roth IRA and you've made nondeductible contributions, the portion of the conversion that comes from those nondeductible contributions is tax-free. For example, if your traditional IRA's value is 20 percent nondeductible contributions, 20 percent of your conversion is tax-free.


The downside to getting money into a Roth IRA through a traditional IRA contribution and conversion is that the five-year holding period is counted separately than the five-year period for the account as a whole. As a result, at least five years have to pass from the date of the conversion before you can take qualified distributions. For example, if you convert to a Roth IRA on July 15, 2014, you can't take qualified distributions from that conversion until July 15, 2019.