Nondeductible IRAs (Contributions, Distributions, and Basis) - irs 2025

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Filers who make nondeductible contributions to an IRA use IRS Form 8606. Any taxpayer with a cost basis above zero for IRA assets should use Form 8606 to prorate the taxable vs. nontaxable distribution amounts. File Form 8606 with Form 1040 or 1040NR by the due date, including due dates for extensions.
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 itll keep you from paying tax on the money a second time when you withdraw it.
When you contribute to a non-deductible IRA, you cant claim a tax deduction. The only real tax advantage is that any growth of your money is tax-deferred in the account. As a result, you wont have to worry about paying taxes on your money while it potentially grows.
Key Takeaways. Non-deductible IRAs lack some of the tax advantages of a traditional IRA or Roth IRA, but they allow you to save more for retirement despite income limits. Non-deductible contributions have eligibility rules and contribution limits.
Use Form 8606 to report: Nondeductible contributions you made to traditional IRAs. Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs.
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Your basis is the total of all your nondeductible IRA contributions minus the total of all nontaxable IRA distributions received. It is to your advantage to keep track of your basis because it is used to figure the nontaxable part of future distributions.
Also use Form 8606 to figure the basis in your IRA(s) and the taxable part of any distributions you received in 1996 if you have ever made nondeductible contributions. Your basis is the total of all your nondeductible IRA contributions minus the total of all nontaxable IRA distributions received.
Use Form 8606 to report: Nondeductible contributions you made to traditional IRAs. Distributions from traditional, SEP, or SIMPLE IRAs, if you have ever made nondeductible contributions to traditional IRAs. Conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs.

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