Backdoor IRA contributions: Tax free?
Although the nondeductible IRA isn't valuable as a buy-and-hold vehicle, it does have some benefits as a conduit to a Roth IRA.
The idea is that even if you earn too much to contribute to a Roth IRA directly, you can open a traditional nondeductible IRA and convert it to a Roth; there is no income limit on traditional nondeductible IRAs or conversions.
Assuming you have no other IRA assets, the only tax you'll owe when you convert from traditional to Roth will be on any appreciation in the assets that occurred from the time you opened the account to the time you converted.
However, the backdoor conversion may not be a good idea if you have other IRA assets that haven't been taxed yet — for example, money that you rolled over from a Traditional 401(k) with a former employer.