A nondeductible IRA is a traditional IRA contribution you do not deduct because income limits block the deduction. Your checklist is to meet the contribution date, file Form 8606 to record after-tax basis, and apply pro-rata tax to later withdrawals or conversions. It fits workers covered by a workplace plan who still want tax-deferred growth. The sections below give limits, deadlines, forms, and fixes you can act on.
Table of Contents
- Do income limits block your deduction?
- When must money arrive?
- Which forms prove after-tax basis?
- How are withdrawals and conversions taxed?
- What if you put in too much?
Do income limits block your deduction?
You face this choice mainly when a workplace plan covers you. The Internal Revenue Service sets phase-out ranges for covered workers, summarized by Kiplinger in February 2026. For 2025, the range is $79,000–$89,000 single and $126,000–$146,000 joint.
For 2026, the range is $81,000–$91,000 single and $129,000–$149,000 joint. The Internal Revenue Service caps total traditional plus Roth contributions. The cap is $7,000 for 2025, or $8,000 at age 50-plus, and cannot exceed taxable compensation. For 2026, the cap rises to $7,500, or $8,600 at age 50-plus with an $1,100 catch-up, with the same compensation limit.
When must money arrive?
According to the Internal Revenue Service in its contribution timing guidance, 2025 contributions were due April 15, 2026, and 2026 contributions are due April 15, 2027. The due date applies without extensions.
Ascensus notes custodians must send Form 5498 by May 31, after the April deadline. The form reports prior-year contributions and fair market value to owners and the IRS. Keep it with tax records; you do not file it.
Which forms prove after-tax basis?
Anyone making a nondeductible contribution must file Part I of IRS Form 8606 for that year. According to Wolters Kluwer analysis in its Form 8606 guide, the filing establishes after-tax basis even when no return is otherwise required. Missing the form risks a $50 penalty without reasonable cause.
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File Form 8606 with your return for the contribution year. Keep a copy plus each Form 5498. Carry the basis total forward each year.
- File Form 8606 Part I for each year you make a nondeductible contribution
- Save the Form 5498 you receive by May 31
- Keep running basis to support later withdrawals or conversions
How are withdrawals and conversions taxed?
After-tax basis does not come out first. According to the Internal Revenue Service in its IRA distribution rules, all traditional, SEP, and SIMPLE IRAs form one pool for tax purposes. Each dollar withdrawn or converted is partly taxable and partly tax-free return of basis.
An example shows the effect. With $20,000 basis in a $100,000 combined balance, 20% of each distribution is tax-free. A $10,000 Roth conversion then returns $2,000 basis tax-free and adds $8,000 to taxable income.
What if you put in too much?
Money reports excess contributions face a 6% excise tax each year until removed. You report the tax on Form 5329.
Removing the excess plus earnings by the return due date stops the recurring tax. Act fast, recheck compensation and combined IRA totals, then correct with your custodian.
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