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Nondeductible IRA Contributions – Form 8606

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Form 8606 is a critical tax form to fill out if you have Individual Retirement Accounts, or IRAs. It reports and tracks the rollover eligibility of after-tax assets from these retirement plans.

When to File Form 8606

retirement contributionsFile an IRS Form 8606 for every year you contribute after-tax amounts (non-deductible IRA contribution) to your traditional IRA, and every year you receive a distribution from your IRA as long as you have after-tax amounts, including after-tax rollover amounts from traditional, SEP, or SIMPLE IRA plans.

(Extra resource: Get a refresher on retirement account terms!)

Use IRS Form 8606 to Deduct IRA Contributions

You might not be able to deduct your traditional IRA contribution. However, you can make nondeductible IRA contributions. If you make nondeductible contributions to a traditional IRA, complete Form 8606 and file it with your return.

Form 8606 is also used to track IRA-related transactions like:

  • Taking distributions from a Roth IRA
  • Taking distributions from a traditional, SEP or SIMPLE IRA at any time after you have made nondeductible IRA contributions
  • Converting a traditional, SEP or SIMPLE IRA into a Roth IRA

IRS Form 8606 helps you keep track of your basis in the account. Basis includes the total amount of nondeductible contributions that you make. This is important since it’ll keep you from paying tax on the money a second time when you withdraw it.

What Are Non-Deductible IRA Contribution Limits?

For a traditional IRA, you’re allowed to contribute up to a maximum of $6,000. If you’re age 50 or older, the maximum is $7,000.

However, if you’re an active participant in a company plan, your traditional IRA deduction:

  • Begins to phase out when your modified adjusted gross income (AGI) reaches $64,000 — or $103,000 if married filing jointly or $65,000 or $104,000 for your 2020 tax return
  • Is phased out completely when your modified AGI is more than $74,000 ($75,000 for 2020)— or $123,000 or ($104,000 for 2020 returns) if married filing jointly. So, you can’t deduct your traditional IRA contribution.

If you’re not an active participant but your spouse is, different AGI ranges apply.

View the full list of rules related to IRA contributions.

How To Fill Out Form 8606

Find a download of the IRS form 8606 from the IRS website. Follow the steps listed on the form. Attach this form to your Form 1040.

Want More Help With Nondeductible Contributions?

If you’re looking for more help with tax reporting using Form 8606 and nondeductible contributions, get the help of H&R Block. Drop off, file online, or work with a tax pro remotely—it’s up to you!

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