Both IRAs in 2021 were traditional. This year I want to contribute 7K to a traditional IRA and nothing to my SEP. I would like to carry forward the 3K that I could not deduct last year and then contribute 4K more to reach the 7K limit (I am over 50 yrs old) for the 2022 IRA contribution. Last year I did file an 8606 form for the 3K. Am I allowed to carry forward this amount? Is the 3K from last year considered an excess IRA contribution? This is what the turbotax software indicates when I enter the numbers. However, I am a little confused about the difference between a nondeductible IRA and an excess contribution and want to make sure I am allowed to carry forward the 3K.
No, you cannot apply the 2021 traditional IRA as a 2022 contribution.
Yes, you will keep track of your basis (nondeductible traditional IRA contribution) on your last filed Form 8606. Please see When to File Form 8606 for additional details.
As long as you had enough taxable compensation to make the IRA contribution then it wouldn't be an excess contribution. If it was an excess contribution then you would have gotten a warning that it was an excess contribution and not just the warning that it is nondeductible because of your MAGI.
If it was only nondeductible you get the screen "Income was too high to deduct an IRA contribution":
If it was an excess contribution you get a "Your IRA contribution isn't permitted" screen and then a "You have currently a Penalty":