Form 8606 is the IRS form that tracks after-tax money inside traditional, SEP, and SIMPLE IRAs so it is not taxed a second time when you convert or withdraw it. You file it for the tax year in which you make a nondeductible traditional IRA contribution, convert IRA money to a Roth, or take a distribution when you have basis (Source: IRS, About Form 8606, https://www.irs.gov/forms-pubs/about-form-8606).
Form 8606 reports nondeductible IRA contributions, Roth conversions, and distributions when you have IRA basis. It exists to record after-tax “basis” so the same dollars are not taxed twice. For 2026, the IRA contribution limit is $7,500, or $8,600 if age 50 or older (Source: IRS Notice 2025-67 and IRS newsroom release, Nov. 13, 2025).
What Form 8606 is and what it does
Form 8606, titled Nondeductible IRAs, is an IRS form attached to your income tax return that records after-tax dollars moving through IRAs. Its core job is tracking “basis,” the money you already paid tax on, so it is not taxed again at conversion or withdrawal (Source: IRS, About Form 8606, https://www.irs.gov/forms-pubs/about-form-8606).
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The IRS lists four uses for the form: reporting nondeductible contributions to traditional IRAs; reporting distributions from traditional, SEP, or SIMPLE IRAs when you have ever made nondeductible traditional IRA contributions; reporting conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs; and reporting distributions from Roth IRAs (Source: IRS, About Form 8606).
Basis is defined narrowly. Per the 2025 instructions, “Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions.” The instructions add that you should keep track of basis “to figure the nontaxable part of your future distributions” (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Who must file Form 8606
You generally must file Form 8606 for a tax year if any one of several triggers applies: you made a nondeductible traditional IRA contribution; you took a distribution from a traditional, SEP, or SIMPLE IRA while your basis is more than zero; you converted traditional, SEP, or SIMPLE IRA money to a Roth; or you took certain Roth IRA distributions (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Deductible-only contributions do not trigger the form. The form appears when after-tax money is involved. A common path into Form 8606 is being phased out of the traditional IRA deduction, which turns an intended deduction into a nondeductible contribution that must be tracked.
| Situation in the tax year | File Form 8606? |
|---|---|
| Nondeductible contribution to a traditional IRA | Yes (Part I) |
| Converted traditional/SEP/SIMPLE IRA to Roth | Yes (Part II) |
| Distribution from a traditional/SEP/SIMPLE IRA and basis is above zero | Yes (Part I) |
| Certain Roth IRA distributions (not a rollover, recharacterization, or return of contributions) | Yes (Part III) |
| Fully deductible traditional IRA contribution only | No |
Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606. Each person files their own form; see the spouse rule below.
The three parts of Form 8606
Form 8606 is organized into three parts, and you complete only the parts that apply to your year. Part I handles nondeductible contributions and basis in traditional, SEP, and SIMPLE IRAs. Part II handles conversions to Roth IRAs. Part III handles distributions from Roth IRAs (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Part I: nondeductible contributions and basis
Part I is where after-tax basis is established and carried forward. The Line 1 instructions say, “Enter on line 1 of Form 8606 your nondeductible contributions.” When there is a distribution or conversion, Part I also calculates the taxable versus nontaxable split using the pro-rata rule, and Line 14 reports your updated total basis to carry into future years; the Line 14 instructions define it as “the amount on line 3 reduced by the amount on line 13” (Source: Instructions for Form 8606 (2025), Lines 1 and 14, https://www.irs.gov/instructions/i8606).
Part II: conversions to a Roth IRA
Part II reports amounts converted from a traditional, SEP, or SIMPLE IRA to a Roth IRA during the year. The taxable portion flows from the Part I basis calculation, and the result feeds your Form 1040. There is no income limit on Roth conversions, which is the mechanism behind the backdoor Roth (Source: IRS Pub 590-A (2025), “Can You Move Amounts Into a Roth IRA?”, https://www.irs.gov/publications/p590a; conversion reporting mechanics per Instructions for Form 8606 (2025), Parts I and II, https://www.irs.gov/instructions/i8606).
Part III: Roth IRA distributions
Part III applies when you take a distribution from a Roth IRA that is not a rollover, recharacterization, or return of contributions. The instructions say to “Complete Part III to figure the taxable part, if any, of your 2025 Roth IRA distributions.” It first draws on your regular Roth contribution basis (Line 22, “the total of all your regular contributions to Roth IRAs for 1998 through 2025”) and then your conversion basis (Line 24, “the total of all your conversions to Roth IRAs”), which reflects the ordering rules for Roth IRA distributions (Source: Instructions for Form 8606 (2025), Part III, Lines 22 and 24, https://www.irs.gov/instructions/i8606; IRS Pub 590-B, https://www.irs.gov/publications/p590b).
Line-by-line: reporting a backdoor Roth on Form 8606
A backdoor Roth is a nondeductible traditional IRA contribution (Part I) followed by a conversion of that money to a Roth IRA (Part II). “Backdoor Roth” is not a statutory term; it describes using these two reportable steps together because there is no income limit on Roth conversions (Source: IRS Pub 590-A (2025), https://www.irs.gov/publications/p590a; conversion reporting mechanics per Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606). Suitability, pro-rata exposure, and timing are among the factors to weigh with a qualified tax or financial professional. For further background reading, see the Q3 Advisors backdoor Roth conversion guide and Roth conversion resource.
The key lines a backdoor Roth touches, based on the 2025 form and its instructions, are shown below. Each line assignment matches the 2025 line-by-line instructions: Line 1 for nondeductible contributions, Line 6 for total year-end IRA value, Line 7 for distributions, Line 8 for “the net amount you converted,” Lines 16 through 18 for the conversion amount, its basis, and the taxable portion, Line 14 for updated basis, and Lines 22 and 24 for Roth contribution and conversion basis. Confirm current-year line numbers against the form you file, because the IRS periodically revises Form 8606 and can reorder lines (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
| Line | What it captures |
|---|---|
| Line 1 | Nondeductible contributions to traditional IRAs for the year |
| Line 6 | Total value of ALL traditional, SEP, and SIMPLE IRAs as of Dec. 31 (plus outstanding rollovers) |
| Line 7 | Distributions taken during the year (not counting conversions) |
| Line 8 | Amount converted to a Roth during the year |
| Lines 16-18 | Conversion amount, its basis, and the taxable portion of the conversion |
| Line 14 | Updated total basis carried to future years |
| Lines 22 / 24 | Roth IRA contribution basis and conversion basis for Part III |
Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606. In a “clean” backdoor Roth with no other pre-tax IRA money, Line 6 is zero, so the entire conversion is nontaxable. The moment Line 6 is not zero, the pro-rata rule changes the math.
The pro-rata rule and the Line 6 trap
The pro-rata rule treats all of your traditional, SEP, and SIMPLE IRAs as a single account when figuring how much of a distribution or conversion is nontaxable. The nontaxable portion equals your total basis divided by the combined December 31 value of every traditional, SEP, and SIMPLE IRA you own, entered on Line 6 (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606; IRS Pub 590-B, https://www.irs.gov/publications/p590b).
This is a frequent point of confusion in backdoor Roth planning. A taxpayer may expect a fresh $7,500 nondeductible contribution to convert tax-free, but existing pre-tax IRA balances (including a rolled-over 401(k)) sit in the Line 6 denominator and make part of the conversion taxable.
A worked pro-rata example (2026 figures)
Assume a hypothetical taxpayer makes a $7,500 nondeductible contribution for 2026 (the 2026 IRA limit, per IRS Notice 2025-67) and converts $7,500 to a Roth, but also holds a rollover traditional IRA worth $67,500 on December 31. This example is illustrative only.
- Basis (Line 1 area): $7,500 after-tax.
- Total year-end value of all traditional IRAs (Line 6): $67,500 rollover + $7,500 = $75,000. The converted $7,500 is added back for this calculation.
- Nontaxable ratio: $7,500 basis / $75,000 = 10%.
- Nontaxable part of the $7,500 conversion: 10% x $7,500 = $750.
- Taxable part of the conversion: $7,500 – $750 = $6,750, added to ordinary income.
- Remaining basis carried forward (Line 14): $7,500 – $750 = $6,750.
The math follows the aggregation approach in the Form 8606 instructions and Pub 590-B (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606; IRS Pub 590-B, https://www.irs.gov/publications/p590b). Some people address the Line 6 balance before converting, for example by moving pre-tax IRA money into a workplace 401(k) that accepts roll-ins; whether that is available or appropriate depends on plan rules and individual circumstances.
Contribution limits and deduction phase-outs (2025 and 2026)
Nondeductible contributions usually arise when income phases out the traditional IRA deduction, so the limits and phase-out ranges matter for who ends up filing Form 8606. The 2026 IRA contribution limit rose to $7,500, with an $1,100 catch-up for age 50 and older, for $8,600 total (Source: IRS Notice 2025-67 and IRS newsroom release, Nov. 13, 2025, https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500).
| Item | 2025 | 2026 |
|---|---|---|
| IRA contribution limit (under 50) | $7,000 | $7,500 |
| Catch-up (age 50+) | $1,000 ($8,000 total) | $1,100 ($8,600 total) |
| Deduction phase-out, single/HoH (covered by workplace plan) | $79,000-$89,000 | $81,000-$91,000 |
| Deduction phase-out, MFJ (contributor covered) | $126,000-$146,000 | $129,000-$149,000 |
| Roth eligibility phase-out, single/HoH | $150,000-$165,000 | $153,000-$168,000 |
| Roth eligibility phase-out, MFJ | $236,000-$246,000 | $242,000-$252,000 |
Sources: IRS Pub 590-A (2025), https://www.irs.gov/publications/p590a; IRS newsroom release and Notice 2025-67 for 2026 figures, https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500. For a fuller table, see the Q3 Advisors 2026 retirement contribution limits guide.
Filing mechanics: how and when to attach Form 8606
The IRS instructions direct you to file Form 8606 with your Form 1040, 1040-SR, or 1040-NR by the due date, including extensions. If you are not required to file an income tax return but must file Form 8606, you sign and send it on its own at the same time and place you would otherwise file. If both spouses have a trigger, each files a separate form (Source: Instructions for Form 8606 (2025)).
The instructions state, “File 2025 Form 8606 with your 2025 Form 1040, 1040-SR, or 1040-NR by the due date, including extensions, of your return.” The due date for making 2025 IRA contributions is April 15, 2026 (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Each spouse who has a filing trigger completes a separate Form 8606, even on a joint return. The instructions say, “If both you and your spouse are required to file 2025 Form 8606, file a separate 2025 Form 8606 for each of you” (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Failing to file when required carries penalties. Under the “Penalty for Not Filing” heading, the instructions state there is a $50 penalty for failing to file a required Form 8606 to report a nondeductible traditional IRA contribution “unless you can show reasonable cause.” Under the “Overstatement Penalty” heading, “If you overstate your nondeductible contributions, you must pay a $100 penalty, unless you can show reasonable cause” (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606). Separately, excess IRA contributions can trigger a 6% excise tax on Form 5329 (Source: 26 U.S.C. section 4973, https://www.law.cornell.edu/uscode/text/26/4973).
How to fix a missing or never-filed Form 8606
If you never filed Form 8606 for past nondeductible contributions, one approach is filing the missing forms to record your basis. To amend a prior year, the instructions say to complete a new Form 8606 with the revised information and file it with Form 1040-X. A standalone Form 8606 may be filed when a return is not otherwise required. The $50 penalty can be waived for reasonable cause (Source: Instructions for Form 8606 (2025)).
The instructions address both reconstruction records and the amendment path. Under “What Records Must I Keep?” the IRS lists Forms 5498, tax returns, and supporting statements. Under “Amending Form 8606,” it explains the Form 1040-X route (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606). A reconstruction sequence consistent with those sections is below. Because reasonable-cause relief and amended-return needs depend on individual facts, some people confirm the specifics with a tax professional before filing.
- Gather records the IRS says to keep: Forms 5498 (IRA Contribution Information), tax returns, and IRA statements showing each nondeductible contribution year (Source: Instructions for Form 8606 (2025), “What Records Must I Keep?”).
- Prepare a separate Form 8606 for each year a nondeductible contribution was made, using that year’s version of the form.
- If you are not otherwise required to file an income tax return for a year, the instructions let you sign and send Form 8606 on its own to the IRS at the same time and place you would file Form 1040.
- If the omission changed your tax for a year, the instructions direct you to complete a new Form 8606 with the revised information and file it with Form 1040-X for that year.
- Attach a brief reasonable-cause statement, plainly stating why the form was missed (for example, that the contribution was made and reported to the custodian but the basis form was inadvertently omitted) and that basis is now being properly recorded.
Keeping a running record of Line 14 basis year to year prevents the problem from recurring. Under-tracking basis is what creates the double-taxation risk the form exists to prevent (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Edge cases: inherited IRAs, SEP, and SIMPLE plans
Basis and beneficiary status change how Form 8606 works. If you inherit an IRA that held nondeductible basis, the basis rules and pro-rata treatment can differ for spousal versus non-spousal beneficiaries, and inherited IRA basis is generally tracked separately from your own IRA basis (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606; IRS Pub 590-B, https://www.irs.gov/publications/p590b).
For SEP and SIMPLE IRAs, employer contributions (including salary-reduction amounts) are not nondeductible contributions and are not entered as basis in Part I. But existing SEP and SIMPLE IRA balances are still counted in the Line 6 pro-rata denominator, because for most Form 8606 purposes “traditional IRA” includes traditional SEP and SIMPLE IRAs (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606). That interaction is a frequent surprise for self-employed savers attempting a clean backdoor Roth.
Withdrawing IRA amounts before age 59.5 can add a 10% additional tax on the taxable portion, subject to IRA-specific exceptions in IRS Topic 557 and Pub 590-B (Source: IRS Topic 557, https://www.irs.gov/taxtopics/tc557). Note that the age-55 separation-from-service exception applies to workplace plans, not IRAs (Source: IRS Topic 558, Additional tax on early distributions from retirement plans other than IRAs, https://www.irs.gov/taxtopics/tc558; 26 U.S.C. section 72(t)(2)(A)(v), https://www.law.cornell.edu/uscode/text/26/72). Related planning topics include the Social Security tax torpedo, Medicare IRMAA brackets, and the net investment income tax, since conversion income can affect all three.
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Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
What is IRS Form 8606 used for?
Form 8606 reports nondeductible traditional IRA contributions, conversions from traditional, SEP, or SIMPLE IRAs to Roth IRAs, distributions from those accounts when you have basis, and certain Roth IRA distributions. Its purpose is tracking after-tax “basis” so those dollars are not taxed a second time (Source: IRS, About Form 8606, https://www.irs.gov/forms-pubs/about-form-8606).
Who needs to file Form 8606?
You generally file Form 8606 if you made a nondeductible traditional IRA contribution, converted traditional, SEP, or SIMPLE IRA money to a Roth, took a distribution while your IRA basis was above zero, or took certain Roth IRA distributions during the tax year (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
What happens if you don’t file Form 8606?
If you were required to file Form 8606 to report a nondeductible traditional IRA contribution and did not, there is a $50 penalty unless you can show reasonable cause. A bigger practical risk is losing track of basis, which can cause the same after-tax dollars to be taxed again at withdrawal (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Is Form 8606 required every year?
No. You file it only for years with a triggering event, such as a nondeductible contribution, a conversion, or a distribution when you have basis. Years with only deductible contributions and no distributions generally do not require the form (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
What is the pro-rata rule for Form 8606?
The pro-rata rule treats all your traditional, SEP, and SIMPLE IRAs as one when figuring the taxable share of a conversion or distribution. The nontaxable portion equals total basis divided by the combined December 31 value of all those IRAs (Line 6). Existing pre-tax balances make more of a conversion taxable (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Can I file Form 8606 by itself?
Sometimes. The instructions say that if you are not required to file an income tax return but are required to file Form 8606, you sign it and send it to the IRS on its own, at the same time and place you would otherwise file Form 1040. If an omission changed your tax, the instructions direct you to file a corrected Form 8606 with Form 1040-X (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Do both spouses need to file Form 8606?
Each spouse with a filing trigger files a separate Form 8606. The instructions say, “If both you and your spouse are required to file 2025 Form 8606, file a separate 2025 Form 8606 for each of you.” On a joint return, that means one Form 8606 for each spouse who has a reporting event that year (Source: Instructions for Form 8606 (2025), https://www.irs.gov/instructions/i8606).
Sources
IRS, About Form 8606, Nondeductible IRAs: https://www.irs.gov/forms-pubs/about-form-8606
Instructions for Form 8606 (2025): https://www.irs.gov/instructions/i8606
IRS Publication 590-A (2025), Contributions to Individual Retirement Arrangements: https://www.irs.gov/publications/p590a
IRS Publication 590-B (2025), Distributions from Individual Retirement Arrangements: https://www.irs.gov/publications/p590b
IRS newsroom, “401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500” (Nov. 13, 2025) and Notice 2025-67: https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
IRS Tax Topic 557, Additional tax on early distributions from IRAs: https://www.irs.gov/taxtopics/tc557
IRS Tax Topic 558, Additional tax on early distributions from retirement plans other than IRAs: https://www.irs.gov/taxtopics/tc558
26 U.S.C. section 72 (early-distribution additional tax and exceptions): https://www.law.cornell.edu/uscode/text/26/72
26 U.S.C. section 4973 (excise tax on excess contributions): https://www.law.cornell.edu/uscode/text/26/4973
