Inherited After Tax IRA
If I inherit an after-tax IRA, do I only pay taxes on the accumulated growth of the portfolio or on the entire amount? For example, $20K total IRA value but $5K was contributed as a non-deductible, after tax contribution. Are taxes owed on the full $20K or just on $15K.
Permalink Submitted by Alan - IRA critic on Wed, 2023-03-29 17:13
Just on 15,000. You inherit the unrecovered basis and transfer it to a Form 8606 on line 2. The 5000 will be prorated against the pre tax value for each year’s distributions, with the remaining basis carrying forward. You would therefore have to file an 8606 each year until the inherited IRA is drained.