Backdoor Roth IRA: What the IRS Says About Nondeductible Contributions, Conversions and Form 8606

“A traditional IRA is a way to save for retirement that gives you tax advantages.”

“Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution.”

“To designate contributions as nondeductible, you must file Form 8606. You don’t have to designate a contribution as nondeductible until you file your tax return. When you file, you can even designate otherwise deductible contributions as nondeductible contributions. You must file Form 8606 to report nondeductible contributions even if you don’t have to file a tax return for the year. A Form 8606 isn’t used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. In those situations, a Form 8606 is completed for the year you take a distribution from that IRA.”

“If you don’t report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made.”

“If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause.”

“You will have to pay a $50 penalty if you don’t file a required Form 8606, unless you can prove that the failure was due to reasonable cause.”

“You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. If properly (and timely) rolled over, the 10% additional tax on early distributions won’t apply. However, a part or all of the distribution from your traditional IRA may be included in gross income and subjected to ordinary income tax.”

“You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you hadn’t converted them into a Roth IRA. These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA.”

“You don’t include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed under Are Distributions Taxable? in Pub. 590-B. […] If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. See Pub. 505.”

“Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it isn't an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them.”

“A conversion of a traditional IRA to a Roth IRA, and a rollover from any other eligible retirement plan to a Roth IRA, made in tax years beginning after December 31, 2017, cannot be recharacterized as having been made to a traditional IRA. If you made a conversion in the 2017 tax year, you had until the due date (including extensions) for filing the return for that tax year to recharacterize it.”

“You can make only one rollover from an IRA to another (or the same) IRA in any 1-year period regardless of the number of IRAs you own. The limit will apply by aggregating all of an individual's IRAs (whether traditional, Roth, or SIMPLE), effectively treating them as one IRA for purposes of the limit. However, trustee-to-trustee transfers between IRAs aren’t limited and rollovers from traditional IRAs to Roth IRAs (conversions) aren’t limited.”

“Note: Except where stated otherwise, “traditional IRA” includes traditional SEP IRAs and traditional SIMPLE IRAs. “Roth IRA” includes Roth SEP IRAs and Roth SIMPLE IRAs.”

“Subtract line 4 from line 3 […] Enter the value of all your traditional IRAs as of December 31, 2025, plus any outstanding rollovers. Subtract certain 2025 retirement plan distribution repayments treated as rollovers, if any. […] Enter your distributions from traditional IRAs in 2025. Do not include rollovers (but do include certain 2025 retirement plan distribution repayments treated as rollovers (see instructions)). Also, do not include qualified charitable distributions; a one-time distribution to fund an HSA; conversions to a Roth IRA; certain returned contributions; or recharacterizations of traditional IRA contributions. […] Enter the net amount you converted from traditional IRAs to Roth IRAs in 2025.”

“Add lines 6, 7, and 8 […] Divide line 5 by line 9. Enter the result as a decimal rounded to at least 3 places. If the result is 1.000 or more, enter “1.000” […] Multiply line 8 by line 10. This is the nontaxable portion of the amount you converted to Roth IRAs.”

“Enter the total value of all your traditional IRAs as of December 31, 2025, plus any outstanding rollovers. A statement should be sent to you by January 31, 2026, showing the value of each IRA on December 31, 2025. However, if you recharacterized any amounts originally contributed, enter on line 6 the total value, taking into account all recharacterizations of those amounts, including recharacterizations made after December 31, 2025.”

“If, in 2025, you converted any amounts from traditional IRAs to a Roth IRA, enter on line 8 the net amount you converted.”

“Complete Part II if you converted part or all of your traditional IRAs to a Roth IRA in 2025.”

“If your entry on line 18 is zero or less, don’t include the result on 2025 Form 1040, 1040-SR, or 1040-NR, line 4b. Include the full amount of the distribution on 2025 Form 1040, 1040-SR, or 1040-NR, line 4a.”

“Your Roth IRA contribution might be limited based on your filing status and income.”

“In light of the changes to the adjusted gross income limitations, under section 408A(c)(3)(A), the adjusted gross income phase-out range for taxpayers making contributions to a Roth IRA is between $242,000 and $252,000 for married couples filing jointly, increased from between $236,000 and $246,000. For singles and heads of household, the income phase-out range is between $153,000 and $168,000, increased from between $150,000 and $165,000.”

“For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.”