IRS Form 8606 Line-by-Line: Parts I, II and III

Executive summary

Form 8606 records nondeductible IRA contributions, allocates basis and reports Roth conversions or certain Roth distributions. Its three parts answer different questions. Read the heading and branch instructions before filling every row of a calculator preview. This walkthrough explains the ordinary lines and identifies the situations that need additional instructions rather than forcing an unusual transaction into a standard example.

Educational guidance for ordinary scenarios. Check the official form's year and filing branches and obtain advice for your actual records.

Begin with the correct person, year and filing path

Use the form for the transaction or contribution year being reported. A married couple filing jointly does not combine both spouses' IRA basis on one Form 8606: each spouse who is required to file prepares a separate form. A contribution made in the following calendar year can still belong to the earlier contribution year. A conversion belongs to the calendar year in which it was completed. Match these designations before copying amounts from Forms 1099-R or 5498 into software.

The Part I heading covers current-year nondeductible traditional IRA contributions, certain distributions when basis exists, and conversions of part but not all applicable traditional IRAs when basis exists. The exceptions and definitions matter: not every transfer, QCD or returned contribution belongs in line 7. Part II reports conversions, while Part III handles Roth distributions requiring its calculation. The site's 2026 worksheet uses published 2026 limits with the 2025 line structure; the IRS's 2026 instructions were still draft when checked on October 17, 2026.

Lines 1–5: determine basis available for this allocation

Line 1 contains the current tax year's nondeductible traditional IRA contributions, including those made during the permitted following-year contribution window. Employer SEP or SIMPLE contributions are not regular nondeductible contributions merely because they entered an IRA. Line 2 contains earlier unrecovered basis under the instructions. Line 3 adds lines 1 and 2. Do not add a contribution to both line 1 and line 2, or treat a contribution that was deducted on a return as nondeductible basis without resolving the discrepancy.

The question after line 3 asks whether there was a relevant distribution or conversion that year. With no such transaction, the official form carries line 3 to line 14 and stops the rest of Part I. Otherwise line 4 identifies the portion of line 1 made after December 31, and line 5 subtracts line 4 from line 3. This keeps a later-paid contribution from being allocated to an earlier calendar-year distribution. Line 4 is a subset of line 1, not a second contribution.

Lines 6–10: identify the pool and calculate the ratio

Line 6 generally uses December 31 values of the owner's applicable traditional, traditional SEP and traditional SIMPLE IRAs plus relevant outstanding rollovers. Employer qualified-plan balances that remain in those plans are not IRA values. Line 7 includes the other distributions covered by the Part I instructions; line 8 includes net conversions. Line 9 adds lines 6, 7 and 8. A conversion is included even when it emptied the IRA, which is why a zero year-end balance alone does not make the entire conversion tax free.

Line 10 divides line 5 by line 9 and caps the ratio at one. The official form calls for rounding to at least three decimal places and entering 1.000 when the result reaches one. This website displays six places below one and 1.000 at the cap, without lowering the precision used internally or changing exported calculation values. Use a consistent whole-dollar convention when preparing an actual return; a planning table that retains cents and high precision is not itself an IRS filing.

Ordinary partial-conversion line walkthrough

This invented example assumes one taxpayer, documented basis, eligible ordinary transactions, no special repayment and no tax withholding. Dollar amounts are planning values. Use the official form's filing branches; a displayed line is not automatically a required entry on a filed return. The 2026 examples apply published 2026 contribution limits with the 2025 allocation structure.

Lines 11–18: recover basis and isolate taxable income

Line 11 applies the line 10 ratio to the conversion amount on line 8. Line 12 applies it to the relevant other distributions on line 7. Line 13 adds the recovered basis, and line 14 generally preserves line 3 less line 13 for future years. Line 15a subtracts the tax-free portion of other distributions from those distributions. Line 15b and the line 15c instructions address special adjustments, including qualified disaster situations. The ordinary calculator flags these cases rather than deciding that every special adjustment is zero.

Part II line 16 reports the conversion amount, line 17 reports its nontaxable portion under the instructions, and line 18 is the taxable conversion. In the worked example, $4,000 basis is allocated across a $20,000 pool. The $6,000 conversion is $1,200 tax free and $4,800 taxable; the other $2,000 distribution uses $400 basis and has $1,600 taxable income. Remaining basis is $2,400. Incremental federal tax is a separate computation and is not entered as the taxable conversion amount.

A full conversion can take a different route

Part I and Part II follow different filing paths. Under the 2025 Form 8606 Part I heading, current-year nondeductible contributions, relevant non-conversion distributions with basis, or a partial conversion with basis can require Part I. If you have only prior-year basis, no current-year nondeductible contribution, no other relevant distribution or outstanding rollover, and convert all traditional/SEP/SIMPLE IRAs with nothing left at December 31, Part I is not required solely for that conversion. Use Part II lines 16–18 and its instructions. For example, a $28,000 full conversion with $7,000 prior basis is $21,000 taxable. The site's allocation worksheet produces the same taxable amount; its displayed Part I rows do not override the official filing path.

For example, an owner with $7,000 prior basis who converts all $28,000 and has no current nondeductible contribution, no other relevant distribution and no year-end IRA value can determine the $21,000 taxable conversion directly in Part II. Completing every Part I row merely because a simulator displays it would confuse the educational allocation with the official filing instructions. If a current nondeductible contribution exists, revisit the Part I heading; do not apply the prior-basis-only shortcut to a different fact pattern.

Part III and the connection to Form 1040

Part III lines 19–25c address certain Roth IRA distributions. The calculation uses distribution definitions, ordering rules, contribution basis, conversion history and qualified-distribution conditions. Regular contributions generally come out before conversions and rollover contributions, which generally precede earnings; conversions have additional ordering rules within and across years. An early Roth withdrawal is not simply another traditional IRA conversion input. Additional tax under Form 5329 can be relevant even when a distribution does not create ordinary taxable income.

For an ordinary traditional IRA conversion, reconcile gross and taxable IRA distribution reporting on the applicable Form 1040 lines 4a and 4b, using the instructions and any other IRA transactions on the return. When the conversion is wholly nontaxable, the gross amount can still require reporting. Form 1099-R box 2b may say taxable amount not determined because the custodian does not know your complete basis. Retain the return, both custodian forms, annual statements and the Form 8606 workpaper. Missing forms, repayments, qualified-plan after-tax rollovers and Part III situations should be reviewed before filing.

About the publisher: Moss Ladder

Moss Ladder owns and publishes RothProRata.com, an independent educational website about IRA basis, Roth conversions and Form 8606. The guides connect official sources with invented examples, document checklists and browser-local planning tools.

AI-assisted tools help prepare explanations and software. Numerical allocation examples state their assumptions and are checked with automated calculations. These engineering checks do not constitute independent CPA or Enrolled Agent review, and no professional tax credential is claimed.

Official sources

Source year and transaction type matter. Citations support the explanation; they do not imply government endorsement.

• U.S. Code (2024 edition): IRC § 408(d)(2) aggregation and § 408(d)(3) rollovers
• IRS: 2025 Form 8606, Parts I and II
• IRS: 2025 Form 8606 instructions (basis, year-end values and conversions)
• IRS: Publication 590-A (2025), contributions and rollovers
• IRS: Publication 590-B (2025), distributions and Roth five-year rules

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