A non deductible IRA contribution is money you put into a traditional IRA that you cannot deduct on your tax return, but it still grows tax‑deferred and must be tracked carefully for future withdrawals. You report these contributions on IRS Form 8606 so you do not pay tax a second time on that already‑taxed “basis” when you take money out or convert to a Roth.

What a non deductible IRA contribution is

  • It is a traditional IRA contribution made with after‑tax dollars when income or plan coverage rules prevent you from taking the normal IRA deduction.
  • Earnings on these contributions grow tax‑deferred, but the contribution itself is not taxed again when withdrawn if properly reported as basis.

When you typically see them

  • Higher‑income earners who exceed the deduction limits for traditional IRAs but still want tax‑deferred growth often end up with non deductible IRA contributions.
  • They are also common for people using the “backdoor Roth” strategy, where a non deductible traditional IRA contribution is later converted to a Roth IRA.

Key tax rules and limits

  • You must still follow the annual IRA contribution limits (for example, standard annual dollar caps with an extra catch‑up amount if age 50+), even if the contribution is non deductible.
  • If you or a spouse are covered by a workplace plan and your income exceeds IRS MAGI ranges, your traditional IRA deduction phases out and may drop to zero, effectively making your contribution non deductible.

How you report non deductible IRA contributions

  • Non deductible contributions are reported on Form 8606, which establishes and tracks your basis (the sum of all past nondeductible amounts) so that part of future withdrawals is tax‑free.
  • Tax software usually asks if your traditional IRA contribution is deductible and, when it is not, it treats the amount as nondeductible and completes the basis and Form 8606 section for you.

Pros, cons, and planning thoughts

  • Potential advantages include: continued tax‑deferred growth, the ability to support a backdoor Roth strategy, and some diversification versus fully taxable investing.
  • Drawbacks include: extra record‑keeping, the risk of paying tax twice if basis is not tracked, and the possibility that a taxable brokerage account could be simpler or even preferable in some situations.

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