Non-deductible IRAs
I believe Ed has said that if you contribute to a non-deductible IRA and try to covert to a Roth, that the non taxable portion of the conversion is on a pro-rata basis. Is that true? For example, If I have $400k in deductible IRAs and $40k in non-deductible IRAs (assume no earnings), I cannot just convert the $40k non-deductible.
Permalink Submitted by Edward Czapor on Tue, 2008-01-29 13:54
That is true, the taxable and non taxable portions are calculated on Form 8606 filed for the year of conversion. The TIRA basis is then reduced by the dollar amount not taxed.
Ed C.