What Is a Nondeductible IRA?

By Robin Hartill, CFP – Updated May 1, 2025 at 12:33 PM

Key Points

Traditional and Roth IRAs are common retirement savings accounts, but income limits may restrict contributions.
Nondeductible IRAs grow tax-free and are an option if you earn too much to deduct your traditional IRA contributions.
Reporting nondeductible IRA contributions on IRS Form 8606 helps you avoid double taxation.

Loading paragraph...

Jar of money labeled IRA sitting next to a calculator and atop various denominations of U.S. currency. — Image source: Getty Images.

Loading paragraph...

Keep in mind:

Loading callout...

To determine if you are limited to a nondeductible IRA, start by calculating your modified adjusted gross income (MAGI).

Loading paragraph...

To determine your MAGI:

Calculate your adjusted gross income (including wages, business income, investment income, and most other income sources).
Subtract above-the-line tax deductions (such as the deductible portion of self-employment tax, contributions to IRAs and health savings accounts, and deductible student loan interest).
Add back in deductions to tax-exempt accounts and tax-exempt interest income.

Then, check our guides to traditional IRAs and Roth IRAs to find out the income limits for the current year. If either you or your spouse is eligible for a workplace retirement plan and your MAGI is too high, you won’t be eligible to make deductible contributions to a traditional IRA. And regardless of participation in a workplace plan, income above a certain threshold makes you ineligible to contribute to a Roth IRA at all.

Loading paragraph...