Sentences with phrase «nondeductible iras»
In fact, some high income earners regularly fund nondeductible IRAs and then convert them to a Roth, a strategy known as the «backdoor Roth IRA.»
http://www.humbledollar.com/ Not exact matches
If you own several traditional IRAs, you must aggregate (add together) all their balances and nondeductible contributions to determine the taxable distribution.
These accounts work much like Roth IRAs, allowing you to make nondeductible contributions, build up investment earnings inside the account, and eventually withdraw the money, including earnings, without paying any tax if the money is used for college expenses.
If you convert only part of your traditional IRA, or if you have more than one traditional IRA and don't convert all of them, then the nontaxable part of your conversion distribution will be determined by a formula where the nontaxable percentage is the amount of your total nondeductible contributions (less any nontaxable distributions you previously received) divided by the total balance of all of your traditional IRAs.
A: Yes, but when you determine how much of your conversion distribution is taxable, you're required to treat all your traditional IRAs as if they were one big IRA, so you don't get any advantage if you take the distribution out of the IRA that has the most nondeductible contributions.
If you've made nondeductible contributions to one or more regular IRAs, then the conversion will be at least partly nontaxable.
A: If you convert the entire amount of all traditional IRAs you own, then the non-taxable part of your rollover distribution is simply the total amount of nondeductible contributions you made to all of those IRAs, less the amount of nontaxable distributions you received in the past.
Q: How do I determine how much of my distribution is nontaxable if I made nondeductible contributions to one or more of my traditional IRAs?
Some people have traditional IRAs that consist mostly of nondeductible contributions.
If you also made nondeductible contributions to your IRAs, some of the amount won't be subject to income taxes.
Once you make a nondeductible contribution or roll over after - tax amounts to any of your Traditional, SEP or SIMPLE IRA, any subsequent distributions from any of your Traditional, SEP or SIMPLE IRAs will include a prorated amount of pretax and post-tax assets, as these IRAs are aggregated for the purposes of determining the taxable amount of any distributions.
Basis, also referred to as after - tax balances, accrue in retirement accounts from nondeductible contributions and rollovers of after - tax amounts to IRAs.
Note that withdrawals from deductible and nondeductible traditional IRAs are subject to ordinary income taxes and if withdrawn prior to age 59 1/2 may be subject to an additional 10 percent federal income tax penalty (for nondeductible traditional IRAs, only the portion of the withdrawal attributable to earnings is taxable).