Can I Contribute to a Non-Deductible IRA If I Have a 401(k)?

Having a 401(k) through your employer does not prevent you from contributing to an Individual Retirement Arrangement (IRA). The presence of a workplace retirement plan, like a 401(k), does influence whether your contributions to a Traditional IRA are tax-deductible. When your income exceeds certain thresholds, you can still contribute to a Traditional IRA, but you cannot deduct those contributions from your current year’s income.

For 2025, the ability to deduct contributions is phased out for single filers covered by a workplace plan with incomes between $79,000 and $89,000. For those married and filing jointly, the phase-out range is $126,000 to $146,000 if the contributing spouse is covered by a workplace plan. If you are not covered by a workplace plan but your spouse is, the deduction phase-out range is $236,000 to $246,000. Contributions made above these limits are known as non-deductible IRA contributions, where you contribute after-tax dollars to a Traditional IRA.

Determining Your Eligibility to Contribute

The requirement to contribute to a Traditional IRA, whether deductible or non-deductible, is having taxable compensation. This includes wages, salaries, commissions, self-employment income, or alimony. As long as you have sufficient earned income, you are eligible to make contributions. Your 401(k) plan and income level are the factors that determine if your contribution can be deducted, not if it can be made.

For 2025, the maximum amount you can contribute to all of your IRAs (Traditional and Roth combined) is $7,000. If you are age 50 or over, you can make an additional catch-up contribution of $1,000, bringing your total potential contribution to $8,000 for the year. These limits apply to the total amount you can put into your IRAs and are not increased if you have both a 401(k) and an IRA.

Understanding the Tax Implications

A non-deductible IRA contribution is made with money you have already paid taxes on, so you do not get an immediate tax break. The benefit is that the investments within the IRA grow on a tax-deferred basis, meaning you do not pay taxes on any interest, dividends, or capital gains as the account value increases. When you withdraw money in retirement, the tax treatment depends on what portion is from contributions versus investment earnings.

Your original non-deductible contributions, referred to as your basis, can be withdrawn tax-free. The portion of the withdrawal from accumulated earnings will be taxed as ordinary income. For example, if you contribute $7,000 to a non-deductible IRA and it grows to $10,000, the original $7,000 is returned tax-free. The $3,000 of investment earnings would be taxable income. If you have both deductible (pre-tax) and non-deductible (after-tax) funds, withdrawals are taxed proportionally based on the ratio of pre-tax to after-tax money across all your Traditional IRAs.

Reporting Contributions to the IRS

To ensure you are not taxed twice on your non-deductible contributions, you must track them by filing Form 8606, Nondeductible IRAs, with your federal tax return. This form is the official record that documents your after-tax basis in your Traditional IRAs, creating a running tally of all non-deductible contributions. You must file Form 8606 for any year you make a non-deductible contribution.

You also file it when taking distributions from any Traditional, SEP, or SIMPLE IRA if you have ever made non-deductible contributions. The form is used to calculate the non-taxable portion of any distribution. It is important to file this form accurately and keep copies indefinitely as part of your permanent tax records. Failure to file Form 8606 when required can result in a penalty. Without this record, the IRS may treat your entire distribution as taxable income, including your original after-tax contribution.

The Backdoor Roth IRA Conversion Strategy

For high-income earners ineligible to contribute directly to a Roth IRA, the non-deductible Traditional IRA serves as a vehicle for a strategy known as the “Backdoor Roth IRA.” For 2025, the ability to contribute to a Roth IRA is phased out for single filers with incomes between $150,000 and $165,000, and for married couples filing jointly with incomes between $236,000 and $246,000. The process is two steps: first, you make a non-deductible contribution to a Traditional IRA, and second, you promptly convert that Traditional IRA into a Roth IRA.

A consideration in this strategy is the IRS pro-rata rule, which applies if you have pre-tax money in any Traditional, SEP, or SIMPLE IRAs. The IRS views all of your non-Roth IRAs as a single pool of money for conversion purposes. The conversion is considered a proportional mix of your pre-tax and after-tax funds, which determines the taxable amount. You cannot simply convert only the after-tax funds from one specific account.

For example, suppose you have an existing rollover IRA with $93,000 in pre-tax funds. You then make a new $7,000 non-deductible contribution, bringing your total IRA balance to $100,000. Of this total, 93% is pre-tax money. If you then convert the $7,000 to a Roth IRA, the IRS considers 93% of that conversion, or $6,510, to be from pre-tax funds and taxable. This tax consequence makes the strategy most effective for individuals who have no other pre-tax IRA assets.