Details on the "Backdoor Roth IRA"

From time to time I write in Retirement Watch about the Backdoor Roth IRA conversion and how it can allow a person who normally isn’t eligible to open a Roth IRA to obtain one at low or no tax cost. Here’s an article laying out all the details.

Before we delve into the workaround, let’s review who might consider a backdoor IRA and how it works. First of all, the backdoor Roth is only going to be of interest to high-income earners. If you’re a single taxpayer who had between $114,000 and $129,000 in modified gross income in 2014, or if you’re part of a married couple filing jointly with between $181,000 and $191,000 in MAGI for 2014, you can go into a Roth IRA through the front door, making a direct contribution to a Roth IRA. Those income bands increase a touch in 2015, to $116,000-$131,000 for single filers and $183,000-$193,000 for married couples filing jointly. (This article details the contribution and income limits that apply to IRAs for 2015.)