Nondeductible IRA

A nondeductible IRA is just a traditional IRA funded by nondeductible contributions. But unlike a traditional IRA, nondeductible contributions come out tax-free in retirement. High-income earners often use a nondeductible IRA as a steppingstone to a Roth IRA.

Terry Turner, writer and researcher for RetireGuide
  • Written by
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner has more than 35 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).

    Read More
  • Edited By
    Lamia Chowdhury
    Lamia Chowdhury, editor for

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.

    Read More
  • Financially Reviewed By
    Ebony J. Howard, CPA
    Ebony J. Howard, CPA

    Ebony J. Howard, CPA

    Credentialed Tax Expert at Intuit

    Ebony J. Howard is a certified public accountant and freelance consultant with a background in accounting, personal finance, and income tax planning and preparation.  She specializes in analyzing financial information in the health care, banking and real estate sectors.

    Read More
  • Published: January 19, 2021
  • Updated: October 16, 2023
  • 6 min read time
  • This page features 13 Cited Research Articles
Fact Checked
Fact Checked

A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics.

Cite Us
How to Cite's Article

APA Turner, T. (2023, October 16). Nondeductible IRA. Retrieved May 19, 2024, from

MLA Turner, Terry. "Nondeductible IRA.", 16 Oct 2023,

Chicago Turner, Terry. "Nondeductible IRA." Last modified October 16, 2023.

What Is a Nondeductible IRA and How Does It Work?

A nondeductible IRA is a way for high-income earners to save additional money for retirement.

There are no income limits on who can make nondeductible IRA contributions.

While you can’t deduct these contributions to lower your yearly tax bill like you can with a traditional IRA or a 401(k) plan, a nondeductible IRA offers some attractive tax advantages when you start withdrawing money during retirement.

First, any investment gains made within the account are tax deferred, so you won’t owe tax on this part of your account until you start making withdrawals after the age of 59.5.

But unlike a traditional IRA, any money you originally contributed to the account comes out tax-free because you didn’t take a deduction when you put it in.

Let’s say you made $50,000 worth of nondeductible contributions to a traditional IRA in the decade before retirement. Over a 10-year period, your investments grew by $8,000. Your total account balance is now $58,000.

You’ll eventually owe taxes on the $8,000 in gains, but not on your original $50,000 in contributions.

You must use IRS Form 8606 to report nondeductible contributions made to traditional IRAs.

What Are the Eligibility Requirements for a Nondeductible IRA?

Anyone can make contributions to a nondeductible IRA so long as they have earned income. But just because you can, doesn’t mean you should choose a nondeductible IRA over other retirement saving options.

Since nondeductible IRAs don’t offer the same tax benefits as other plans, you typically should only choose a nondeductible IRA if you don’t qualify for other retirement accounts.

You may also want to contribute to a nondeductible IRA if you hit your annual limit for contributions to your 401(k) or similar employer plan. The IRS adjusts the limit annually. It is $23,000 in contributions for 2024.

If you have access to an employer plan, then your eligibility to contribute to a nondeductible IRA will phase out if your modified adjusted gross income (MAGI) reaches certain levels. These limits depend on your filing status and access to a workplace plan.

If you are covered by an employer plan, and your income is below the ranges listed for the different filing statuses below, you are eligible for a full deduction. If it’s within the range, you qualify for a partial deduction. If it’s above the range, you do not qualify for a deduction.

IRA Contribution Phase-Out Ranges for People with Workplace Retirement Plans, 2024
Filing StatusPhase-Out Range
Single$73,000 to $83,000
Married, filing jointly$116,000 to $136,000
IRA contributor not covered by workplace plan, but is married to someone who is$210,000 to $228,000
Married, filing separately and covered by a workplace plan$0 to $10,000
Source: IRS

Suppose you don’t have a retirement plan from your employer. In that case, you can fully deduct the amount you contribute to your traditional IRA, irrespective of your income. However, the deductible also depends on whether your spouse has a retirement plan.

To determine your eligibility, you can use the IRA Worksheet in the IRS Form 1040 instructions.

Pros & Cons of Nondeductible IRAs

As with any retirement plan, there are pros and cons to nondeductible IRAs.

For instance, nondeductible IRAs can be an option for people who may not qualify for more traditional retirement savings plans. But they also require that you do much of the record keeping yourself.

Nondeductible IRA Pros & Cons
  • Allows you to contribute more than law allows in your current retirement plans
  • Withdrawals are tax free
  • Can continue making contributions at any age so long as you meet IRS rules
  • No income limits on who can contribute
  • No immediate tax benefit since contributions are made after tax dollars
  • You must keep track of your contributions, so you are not taxed on withdrawals
  • Must file IRS Form 8606 with your tax return each year you contribute
  • Penalties if you withdraw money before you turn 59½

What Are the Contribution Limits with a Nondeductible IRA?

Nondeductible IRAs are subject to the same contribution limits as other IRAs.

The contribution limit for a nondeductible IRA is $7,000 in 2024. If you are 50 or older, you can make an additional catch-up contribution of key=”retirement_ira_current_catch_up”]. You and your spouse can each contribute to an IRA if you both are eligible to contribute to a nondeductible IRA.

You can also make contributions to different types of IRAs — nondeductible, tax deductible or Roth IRA — in the same year. But the combined total of your contributions cannot exceed that $7,000 — and $1,000 catch-up limit if you qualify.

Is a Nondeductible IRA Right for You?

A nondeductible IRA makes the most sense for people who are unable to enjoy the tax advantages of other individual retirement accounts because of income, filing status or eligibility requirements.

For example, you cannot contribute to a Roth IRA if your modified adjusted gross income exceeds its phase-out range. With that option eliminated, you may consider a traditional IRA.

If neither you nor your spouse has access to a retirement account at work, you are free to open a traditional IRA.

You’ll be able to contribute the maximum $7,000 a year — or an extra $1,000 a year for people ages 50 and up. You can also deduct contributions from your yearly taxes.

However, if you or your spouse have access to a 401(k) plan or similar employer-sponsored account and you earn too much to contribute to a Roth IRA, you also earn too much to deduct contributions to a traditional IRA.

Check your phase-out range based on you income and filing status to determine whether making nondeductible IRA contributions may be a good option.

Converting to a Backdoor IRA

Deferring taxes on your IRA investment gains is nice — but what if you could avoid those taxes completely?

Enter a backdoor IRA.

If your income locks you out of a Roth IRA, you can simply contribute to a nondeductible IRA and then convert to a Roth.

It’s a legal way for high-income earners to reap additional tax benefits.

Roth contributions are made with after-tax dollars. When you convert nondeductible IRA contributions to a Roth, you’re also converting after-tax dollars.

Once the conversation is completed, any investment gains within the account can be withdrawn as a qualified distribution tax free.

How to Perform a Backdoor IRA
  1. Open a new traditional IRA.
  2. Make nondeductible contributions to it.
  3. Convert it into a Roth IRA.

If you want to convert a nondeductible IRA to a Roth IRA, it’s best to do so quickly. Otherwise, the nondeductible contributions inside your IRA can accumulate investment gains — and you’ll owe tax on that growth if you convert to a Roth IRA.

Most brokerages can help you handle a backdoor Roth IRA conversion.

Check with your IRA providers to learn more about specific paperwork and requirements.

Never Miss Important News or Updates with Our Weekly Newsletter
Get money-saving tips, hard-to-find info and tactics for a successful retirement in our free weekly newsletter.

Connect With a Financial Advisor Instantly

Our free tool can help you find an advisor who serves your needs. Get matched with a financial advisor who fits your unique criteria. Once you’ve been matched, consult for free with no obligation.

Last Modified: October 16, 2023

13 Cited Research Articles

  1. Internal Revenue Service. (2022, March 3). About Form 8606, Nondeductible IRAs. Retrieved from
  2. Internal Revenue Service. (2022, January 03.). IRA FAQs. Retrieved from
  3. Marquit, M. (2021, December 22). What Is a Backdoor Roth IRA? Retrieved from
  4. Internal Revenue Service. (2021, November 5). Roth IRAs. Retrieved from
  5. U.S. Internal Revenue Service. (2021, November 4). IRS Announces 401(k) Limit Increases to $20,500. Retrieved from
  6. Internal Revenue Service. (2021, October 26). 2021 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work. Retrieved from
  7. Internal Revenue Service. (2021, October 26). 2021 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work. Retrieved from
  8. Marquit, M. (2020, December 14). What Is A Backdoor Roth IRA? Retrieved from
  9. Internal Revenue Service. (2020, November 16). 2021 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are NOT Covered by a Retirement Plan at Work. Retrieved from
  10. Internal Revenue Service. (2020, November 16). 2021 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work. Retrieved from
  11. Internal Revenue Service. (n.d.). IRA FAQs. Retrieved from
  12. Internal Revenue Service. (2020, November 10). Roth IRAs. Retrieved from
  13. Internal Revenue Service. (2020, September 23). About Form 8606, Nondeductible IRAs. Retrieved from