We usually contribute to a Roth IRA, but our income is variable enough that sometimes our MAGI is over the limit. In this case I want to contribute the full amount (post-tax) to a traditional IRA and then immediately transfer to the Roth IRA. Is this a way around the MAGI limit? It seems like this is either not legal, or there is some other downside to doing this since it seems like I will have completely bypassed the limit. What am I missing?

Edit to clarify: If I am below the MAGI limit, I put $5,500 post-tax directly into a Roth. If I am above the limit, I put $5,500 post-tax into a traditional IRA. Then I immediately transfer it to a Roth. Since I move it right away, there is no gain, and therefore no tax. The effect appears to be the same. So, the question is: Why does the MAGI limit on the Roth exist if it can be bypassed by putting the money into a traditional IRA and then moving it immediately to a Roth? Is this a loop-hole, or is there a reason that one cannot or should not convert to a Roth immediately?

  • 2
    Duplicate of money.stackexchange.com/questions/6703/… please read that Q&A and see if it answers your question. (Welcome to Money.SE! The question is great, and on topic. So good, it's been addressed already. Search around the site a bit, and see what you can learn. I hope to see you return with more questions for our members.) Apr 15, 2014 at 18:00
  • @JoeTaxpayer Yes, saw that question, and this one: money.stackexchange.com/questions/11089/… I think both tell me that this is what I want to do, but it still seems like there is something wrong when I can just dance around this limit with th extra step. I guess the answer could just be "Tax laws don't always make much sense"
    – nguthrie
    Apr 15, 2014 at 20:02
  • The one I linked clearly shows that it's not 100% free for those who have pretax savings in their IRA already. But it is a loophole for those who don't, one that congress can easily close if they wish. Apr 15, 2014 at 20:07
  • @nguthrie: yes, the answer is just tax laws don't always make sense
    – user102008
    Apr 15, 2014 at 23:37

1 Answer 1


The backdoor Roth IRA contribution has been possible for a few years now and is fairly widely known. The IRS hasn't said anything negative about it. An answer to my question here mentions that it could hypothetically be disallowed through the "step transaction doctrine", although that is the only time I have heard that possibility raised.

For some background, the income limit on Roth conversions was removed as a "revenue-offsetting provision" of the Tax Increase Prevention and Reconciliation Act of 2005. They want people who have deducted contributions in Traditional IRAs to convert to Roth and pay taxes now rather than waiting many years until retirement. Conversely, people performing the backdoor Roth IRA contribution have already paid taxes on that money and it's just preventing them from having to pay taxes many years later. It's easy to see how Congress would find this a satisfactory exchange.

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