Posted by Fred Lake

What is the 8606: the non-deductible IRA?

What is the 8606: the non-deductible IRA?

Form 8606: Unconditional IRA is a tax form distributed by the Internal Revenue Service (IRS) and used by taxpayers unconditionally contributing to an IRA. A different form must be provided for each fiscal year in which non-deductible contributions are made. Generally, contributions to an IRA (individual retirement account) are deductible from ordinary income. However, in certain circumstances, persons participating in an employer-sponsored retirement plan and whose modified-income families (MAGI) may not be able to make such contributions deductible. You can still contribute to an IRA, and it will not just reduce your regular income.

IRAs are available in several variants:

  • You may be able to deduct fees for the money deposited in your account with a traditional IRA. Account income is tax-free. When you collect, you pay taxes on the profits and on the contributions for which you made a deduction.
  • With a Roth IRA, you do not get a tax deduction for the money you deposit, but your income is not taxable, and you usually pay tax on distributions of your claims or profits.
  • A SEP-IRA or Simplified Employee Pension is a traditional IRA created for an employee by an employer. The employer contributes to this money.
  • A simple IRA is a traditional IRA defined by an employer where the employer and the employee contribute at a time.

Traditional IRA and deductibility

Overall, in 2018, taxpayers can deduct up to $5,500 a year for the money they contribute to a traditional IRA, or $6,500 if they are over the age of 50. However, if you qualify for a pension plan through your employers, such as a retirement pension or 401K, your deduction may be limited or prohibited, depending on your income.

Since 2018, if you have a retirement plan at work, you can deduct a partial deduction only if your income exceeds:

  • $63,000 if you are single
  • $101,000 if you are married and have a common return

You cannot deduct IRA contributions if you have a workplace pension plan and your income is greater than:

  • $ 73,000 if you are alone
  • $ 121,000 married with a joint declaration

Keep in mind that you can still contribute to an IRA in these situations and that your income will continue to grow without tax. All you are interested in is how much you can deduct for the current year.

Who can file Form 8606?

Form 8606: Non-deductible IRAs must be submitted with standard forms (1040, 1040A or 1040NR) for individual applicants. Each taxpayer with a higher zero cost base for IRA activities a combination of after-tax and after-tax contributions or deductible and non-deductible must use Form 8606 to allocate the taxable distribution in non-taxable amounts. If 8606 does not appear in a distribution year, it is likely that the taxpayer is liable to income tax and possibly a fine for what may be tax-free.

Other uses for IRS 8606

The module does not only refer to the reporting of contributions that are not deductible in traditional IRAs. It also uses it to report other IRA-related transactions, in which the government should monitor the status of the money, whether taxable or not. The 8606 module is also used when:


    • Take distributions from a Roth IRA
    • Make distributions of a traditional IRA, SEP or SIMPLE at any time after making non-deductible contributions to the IRA
    • Convert a traditional IRA, SEP or SIMPLE into a Roth IRA

How to file Form 8606

Form 8606 file with 1040NR 1040 module or before the expiration date, including extensions. If you ought not to file a tax return, but you have to send Form 8606, sign it 8606 and send it to the IRS at the same time and place it where you are showing 1040NR or 1040 Enter the taxpayer's address on page 1 of the form and signature and once on page 2 of the form.

Main point


    • Form 8606 is a tax form issued by the Internal Revenue Service and used by taxpayers who contribute non-deductible to an IRA.
    • Any taxpayer whose cost base is greater than zero for ARI activities a combination of after-tax contributions and before-tax or after-tax contributions or deductible and non-deductible must use Form 8606 to allocate the taxable distribution amounts about to those paid Taxable.
Fred Lake
Contact This Member