What is a nondeductible IRA contribution and why do I need Form 8606?

A nondeductible contribution is money you put into a Traditional IRA without taking a tax deduction – usually because your income or workplace-plan coverage disqualifies the deduction. That after-tax money becomes your 'basis,' and you must report it on IRS Form 8606 for the year you contribute. Tracking basis matters enormously: it's the only way to avoid being taxed twice on the same dollars when you later withdraw or convert. Without filed 8606 forms, the IRS assumes your entire IRA is pre-tax and taxes all of it again. Form 8606 also drives the backdoor Roth calculation and the pro-rata rule. Keep copies of every year's 8606 indefinitely – they're the running ledger of your after-tax IRA money, and reconstructing them years later is painful.