non-deductible IRA’s?
iS THERE SUCH A THING AS NON-DEDUCTIBLE ira’S?
My FMO says NO???
Client maxed out their 401K then statred their own IRA which they now want to convert to a roth
thanks for clairification
rob corbin
iS THERE SUCH A THING AS NON-DEDUCTIBLE ira’S?
My FMO says NO???
Client maxed out their 401K then statred their own IRA which they now want to convert to a roth
thanks for clairification
rob corbin
Permalink Submitted by Jose Morales on Wed, 2010-08-11 22:02
There are non-deductible Traditional IRA contributions and their are Roth IRA contributions, which are also non-deductible. Because you mentioned a conversion, I’m going to assume you are asking about making non-deductible contributions to a Traditional IRA. When converting from a Traditional to a Roth IRA you would calculate the percentage of the conversion that is taxable by determining the portion of the individual’s overall Traditional IRA portfolio that is made up of non-deductible contributions.
Permalink Submitted by Alan Spross on Wed, 2010-08-11 23:41
urusei is correct.
The term “non deductible IRA” is a misnomer that should be eliminated from IRA vocabulary. It reinforces the idea that a specific IRA account carries it’s own basis instead of being part of the commingled basis required of all TIRA, SEP and SIMPLE owned IRA accounts. A contribution to a TIRA can be deductible or non deductible or partially composed of each. Even if the client qualifies for a deductible TIRA contribution, he can optionally file an 8606 and designate the contribution as non deductible.
Similarly, the more correct term “non deductible contribution” is more accurate, but still leaves confusion whether that contribution was to a traditional IRA or a Roth IRA.
This is probably what your advisor or IRA custodian rep is referring to.