How to Report Nondeductible IRA Contributions on Form 8606

To report nondeductible IRA contributions on Form 8606, enter the year’s nondeductible amount on line 1 of Part I, add your accumulated basis from prior years on line 2, and attach the completed form to your Form 1040 by your regular filing deadline. If you also took a distribution or did a Roth conversion during the year, you’ll complete the pro-rata calculation in the rest of Part I or move on to Part II. The form is the IRS’s only record that some of the money in your Traditional IRA has already been taxed, so filing it protects you from paying tax on the same dollars twice.

What Form 8606 Does

Money in a Traditional IRA comes from two sources: pre-tax contributions you deducted and after-tax contributions you didn’t. The cumulative total of after-tax contributions is your basis. When you eventually withdraw money, basis comes out tax-free because you already paid tax on it; deductible contributions and all investment growth are taxable.

Form 8606 is the only record the IRS has of your basis. Without it, the default assumption is that every dollar in the account is taxable.¹ Federal law requires you to designate nondeductible contributions on your tax return, and Form 8606 is the prescribed method.²

Gather Three Things First

Before you open the form, pull together three items.³

First, the exact dollar amount of nondeductible contributions you made for the tax year. Your bank or brokerage statements show this, and your custodian reports it to the IRS on Form 5498.

Second, the total fair market value on December 31 of every Traditional, SEP, and SIMPLE IRA you own, plus any outstanding rollovers. This appears on your year-end statements. You only need this figure if you took a distribution or did a conversion; if you just contributed and did nothing else, you can skip it.

Third, your most recent previously filed Form 8606. Line 14 of that form is your accumulated basis from prior years, and it carries forward to line 2 of the current form. If you’ve never filed 8606 before, line 2 is zero. Keep every copy permanently, paper or digital; losing track of prior-year forms is one of the most common problems with this process.

Filling Out Part I

Part I is where you establish and update your basis. If you made a nondeductible contribution and took no distributions or conversions, only the first three lines matter.¹

Line 1: Your nondeductible contributions for the current tax year.
Line 2: Your total basis from all prior years, pulled from line 14 of your most recent Form 8606. Zero if this is your first time filing.
Line 3: Add lines 1 and 2. This is your total basis before any distributions.

With no distributions in the year, line 3 becomes your new total basis and carries forward to next year. You’re done with Part I.

Contributions for a tax year can be made up to April 15 of the following year, so a 2026 contribution can still be made through April 15, 2027 and reported on that year’s 8606.⁴

If You Took a Distribution

Distributions trigger the rest of Part I, because the IRS treats all your Traditional IRAs as a single pool. You cannot pull out just the nondeductible portion and call it tax-free. Every distribution is a proportional mix of taxable and nontaxable dollars.³

The math: divide your total basis by the combined year-end value of all your Traditional, SEP, and SIMPLE IRAs. That’s your nontaxable percentage. Multiply it by the distribution to get the tax-free portion; the rest is taxable income.

An example. If your total basis is $30,000 and the combined year-end IRA value is $300,000, your nontaxable percentage is 10%. Withdraw $50,000 and $5,000 comes out tax-free; $45,000 is taxable. Form 8606 walks through this line by line, and the remaining basis carries to next year’s form.

The aggregation rule catches people who assume they can park nondeductible money in a separate IRA and withdraw it cleanly. The IRS doesn’t care which account holds the money; the ratio applies across all of them.

Early withdrawals interact with the same calculation. The 10% additional tax on distributions before age 59½ applies only to the taxable portion, so the basis share of any early withdrawal escapes the penalty.⁵

If You Did a Roth Conversion

Converting Traditional IRA money to a Roth IRA is reported in Part II. If the only money in your Traditional IRA is the nondeductible contribution you just made, the conversion is nearly tax-free; you’d owe tax only on any growth between the contribution and the conversion. Line 18 subtracts basis from the amount converted to get the taxable portion.¹

The pro-rata rule applies here too. If you also hold pre-tax money in any Traditional, SEP, or SIMPLE IRA, the conversion is treated as coming proportionally from your entire IRA pool. Someone with $5,500 of nondeductible contributions and $200,000 of pre-tax IRA money would find that only about 2.7% of any conversion is tax-free. People planning a backdoor Roth who also have large pre-tax IRA balances sometimes roll the pre-tax funds into a 401(k) first to zero out that pool before converting.

How and When to File

Attach Form 8606 to your Form 1040 or 1040-SR. The deadline is your regular return due date, including extensions.¹

If you aren’t otherwise required to file a return but you made nondeductible contributions, you still need to file Form 8606 on its own. Sign the form and mail it to the IRS service center where you’d normally send a return.

Penalties for Skipping It

A $50 penalty applies for each year you fail to file Form 8606 when required. A $100 penalty applies if you overstate your nondeductible contributions. Both can be waived for reasonable cause.⁶

The dollar penalties are small. The real cost of not filing is losing proof of your basis, which can mean paying income tax later on thousands of dollars you already paid tax on.

Fixing Years You Missed

If you made nondeductible contributions in prior years but never filed Form 8606, the IRS instructions let you file an amended return using Form 1040-X with a corrected Form 8606 attached.¹ You may owe the $50 per-year penalty, but establishing your basis is worth far more in most cases. The same amendment process applies if you need to switch a contribution between deductible and nondeductible.

Reconstructing basis from years ago is the hard part. You’ll need old bank or brokerage statements or prior-year Forms 5498. Some custodians can retrieve records going back a decade or more. If your records are incomplete, gather what you have and work with a tax professional to document the basis as accurately as possible.

1
Internal Revenue Service. Instructions for Form 8606
2
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
3
Internal Revenue Service. Instructions for Form 8606
4
Internal Revenue Service. IRA Year-End Reminders
5
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
6
Office of the Law Revision Counsel. 26 USC 6693 – Failure to Provide Reports on Certain Tax-Favored Accounts or Annuities; Penalties Relating to Designated Nondeductible Contributions