You need to fill out form 8606. See:
Only the income, if any, should be taxable. The other is basis, assuming you didn't deduct any of it. Vanguard has no idea if you deducted it or not.
Peter Foley wrote:
Married filing jointly you will have 12,400 as a standard deduction and 7,900 in exemptions. This wipes out part of your income for the purposes of taxes. The result in "taxable income."