Trad IRA to Roth IRA conversion

[AVTax]

Hi All,

This is all for tax year 2024. (Actions completed in 2024) I am essentially doing the backdoor Roth IRA. Background: I don't own any trad IRA except the one for this year (to be converted to Roth IRA). I contributed $6000  (I know even though the limit was $7K), it is non deductible. I am not eligible to claim it as a deductible since both spouse and I have a 401K through workplace. 

The Trad IRA was $6,125 (appreciated by $125) by the time I converted it to Roth.

So questions:

1) Do I need to treat that $125 as additional income and include on my tax return (and pay tax on it) for 2024?

Or since it was a non-deductible contribution, does it grow tax free (since I have already paid tax on the original contribution) and can be converted to Roth without worrying about taxes? 

2) For purposes of the filling form 8606, will the converted amount be $6,125 with a $6,000 cost basis (showing an earning of $125). or will the converted amount be $6,125 since it was all essentially non-deductible contribution to begin with?

Appreciate any help! Thanks in advance! 

[DanaB27]

1) Yes, the earnings will be taxable income when you convert them with the rest of the contribution.

2) Yes, the converted amount will be $6,125 assuming you moved all of the funds to the Roth IRA (on line 8 and line 16 of Form 8606). Yes, the basis will be $6,000 (on lines 1, 3, and 5 of Form 8606). The earnings of $125 will be taxable (on line 18 of Form 8606).

Please see How do I enter a backdoor Roth IRA conversion? for additional information.