Form 8606: Nondeductible IRA Basis Explained

What Is Form 8606?

Form 8606, Nondeductible IRAs, is used to report nondeductible contributions to traditional IRAs, calculate the taxable part of certain traditional IRA distributions and Roth conversions, and report certain Roth IRA distributions. Its core purpose is to track money that has already been taxed so it is not taxed again when distributed.

Form 8606 is filed with Form 1040, 1040-SR, or 1040-NR when required. It is not the same as Form 5498, which an IRA custodian issues to report contributions and year-end information.

When is Form 8606 required?

A taxpayer may need the form when the taxpayer:

• Makes a nondeductible contribution to a traditional IRA.
• Takes a distribution from a traditional, SEP, or SIMPLE IRA after having traditional IRA basis.
• Converts money from a traditional, SEP, or SIMPLE IRA to a Roth IRA.
• Receives certain Roth IRA distributions.

A deductible traditional IRA contribution generally is reported through Schedule 1 rather than creating basis on Form 8606. A Roth IRA contribution by itself ordinarily is not reported on Form 8606. The form can still be required in a later year even when no new nondeductible contribution is made.

What is traditional IRA basis?

Basis is the total after-tax amount remaining in the taxpayer's traditional IRAs. It typically begins with nondeductible traditional IRA contributions, is increased by later nondeductible contributions, and is reduced when basis is recovered through distributions or conversions.

Prior-year Form 8606 line 14 is a critical starting record. Custodians usually do not track a taxpayer's tax basis across all IRA accounts, and Form 1099-R may show that the taxable amount was not determined.

How does the pro-rata rule work?

For this calculation, traditional IRAs generally include all of the taxpayer's traditional, SEP, and SIMPLE IRAs. Separate account numbers do not isolate after-tax dollars. The calculation considers distributions and conversions during the year and the total value of the aggregated IRAs at year-end, with special adjustments described in the instructions.

Suppose Maria has $20,000 of traditional IRA basis. During the year she converts $30,000 to a Roth IRA, and her aggregated traditional, SEP, and SIMPLE IRA value at year-end is $70,000. Ignoring other adjustments, the denominator is $100,000:

Maria cannot simply declare that the converted $20,000 came only from basis. Form 8606 allocates basis proportionately.

Form 8606 and a backdoor Roth IRA

A "backdoor Roth" commonly describes a nondeductible traditional IRA contribution followed by a Roth conversion. The phrase does not create an exemption from the pro-rata rule. Existing pre-tax traditional, SEP, or SIMPLE IRA balances can make much of the conversion taxable.

Contribution eligibility, conversion timing, year-end balances, prior basis, investment gains or losses, and the separate step-transaction facts should be reviewed. A contribution for one tax year and a conversion in the next calendar year can require Forms 8606 for two different years.

What if Form 8606 was missed?

Reconstruct basis from prior returns, Forms 5498, contribution confirmations, and IRA statements. The IRS permits Form 8606 to be filed separately in certain circumstances, but an amended return may be appropriate when taxable income or another return item changes. A penalty can apply for failing to file the form when required unless reasonable cause exists.

Do not carry forward unsupported basis merely because a taxpayer remembers making after-tax contributions. Conversely, do not default to zero without reviewing available records. Missing basis can cause the same contribution to be taxed twice.

Where do Form 8606 amounts go?

Traditional IRA distributions and conversions are reconciled with Form 1099-R and flow to the IRA distribution lines of Form 1040 or Form 1040-SR. The return commonly shows both the gross amount and the taxable amount. Form 5329 may calculate an additional tax on an early distribution when applicable.

Part I addresses nondeductible contributions and traditional IRA distributions; Part II addresses conversions; and Part III addresses Roth IRA distributions. Use the current form because line references and worksheets can change.

California treatment

Federal and California IRA basis can differ because California has not always conformed to every federal contribution and deduction rule. A taxpayer who made an IRA contribution while a California resident or moved between states may need a separate California basis schedule.

Do not assume the federal Form 8606 basis automatically equals California basis. Retain California returns, Schedule CA adjustments, and contribution records for as long as basis remains. A federal conversion amount can require a California adjustment when the state basis is different.

Records to retain

• Every prior Form 8606.
• Forms 5498 and 1099-R.
• IRA contribution and conversion confirmations.
• Year-end statements for every traditional, SEP, and SIMPLE IRA.
• Records showing whether contributions were deducted.
• Prior federal and California returns and Schedule CA adjustments.
• Recharacterization, return-of-contribution, and rollover records.

Common Form 8606 mistakes

• Filing it only in the year basis is created and losing the carryforward.
• Applying the calculation account by account instead of aggregating IRAs.
• Omitting SEP or SIMPLE IRA balances.
• Using the balance on the conversion date instead of the required year-end information.
• Treating an entire backdoor Roth conversion as tax-free.
• Confusing a Roth contribution with a Roth conversion.
• Entering Form 1099-R box 1 as the taxable amount without the basis calculation.
• Assuming California basis always matches federal basis.

Frequently asked questions

Related terms

• Traditional IRA
• Roth IRA
• Form 1099-R
• Tax Basis
• Required Minimum Distribution

Official sources

• IRS — About Form 8606
• IRS — 2025 Instructions for Form 8606
• IRS — 2025 Form 8606
• IRS — Publication 590-A, Contributions to IRAs
• IRS — Publication 590-B, Distributions from IRAs
• California FTB — 2025 Form 540 booklet

The definitions and examples on this page are for informational purposes only and do not constitute tax advice. Tax laws change frequently and individual circumstances vary. Consult a qualified tax professional before making decisions based on this content.