Backdoor Roth IRA for H1B: When and How

What is the Backdoor Roth IRA?

If your income exceeds the Roth IRA income limits ($161,000 single, $240,000 married in 2026), you cannot contribute directly to a Roth IRA. The backdoor Roth is a legal workaround:

1. Contribute $7,000 to a Traditional IRA (non-deductible — you don't claim the deduction)
2. Convert that Traditional IRA to a Roth IRA immediately (within days)
3. Pay tax only on growth between contribution and conversion (usually $0 if done same day)

Who needs this?

Most H1B holders at major tech companies in California, New York, or Seattle earning $130K+ salary + RSUs are above the Roth IRA income limit. Backdoor Roth is the only way in.

Step-by-step at Fidelity

1. Open a Traditional IRA at Fidelity (takes 5 minutes)
2. Contribute $7,000 (or $8,000 if 50+) — do NOT select "deductible contribution"
3. In the contribution screen, note: you contributed after-tax dollars
4. Go to Accounts → Transfer → Convert to Roth IRA
5. Select the Traditional IRA → convert all → confirm
6. At tax time, your Form 1099-R will show a conversion; report on Form 8606

The Pro-Rata Rule (watch out!)

If you have other Traditional IRA money (from old 401k rollovers), the IRS applies the pro-rata rule: your conversion is taxed proportionally across all Traditional IRA funds.

Fix: Roll your Traditional IRA into your current employer's 401k plan before doing the backdoor Roth. Most 401k plans accept incoming rollovers.

Mega Backdoor Roth

If your 401k plan allows after-tax contributions (not all do — check with HR), you can contribute an additional ~$46,000 per year in after-tax money and immediately convert it to Roth. This is the "mega backdoor" — up to $69,000 total into Roth annually.

Form 8606 — don't forget this

Every year you do a backdoor Roth, you must file Form 8606 with your tax return. This tracks your non-deductible contributions and prevents double-taxation when you eventually withdraw.

Watch the Roth vs 401k video →