Talk:Non-deductible traditional IRA

For some reason I can't match the numbers for taxable account in the table. Here are what I got using the same assumptions. year 1 investment in taxable 7200 capital growth @ 6% = 432 dividend @ 2% = 144 tax on dividend @ 15% = 21.60 reinvest dividend/increase in basis = 144 - 21.6 = 122.40 value at year 2 = 7200 + 432 + 122.40 = 7754.40 basis at year 2 = 7200 + 122.40 = 7322.40 Tfb 00:06, 23 August 2008 (UTC)

I've confirmed that. Let me fix the numbers. Thanks for pointing out the problem. PiperWarrior 01:21, 23 August 2008 (UTC)

I see the page has 2009 phaseout numbers already. What else needs updating? Can we remove the UpdateNeeded tag? Tfb 13:49, 20 July 2009 (UTC)


 * A couple of points:
 * Does the 2010 change in income limits for Roth conversions need expansion?
 * The section == I have a large Traditional IRA with deductible contributions and/or rollover contributions from an old 401(k). Should I make non-deductible contributions to a Traditional IRA? ==

May need revision. Current Version:

Notice that you cannot just convert the non-deductible part to a Roth IRA.

There are a couple of ways to work around this problem.


 * Rollover your Rollover IRA back to a 401(k). You may not want to do this if your 401(k) does not have low-cost options.
 * Rollover your Rollover IRA to a solo 401(k). Fidelity, Vanguard, and T. Rowe Price offer solo 401(k) plans to self-employed individuals.

If you do either one of these, the balance in your non-Roth IRA significantly drops. In turn, the amount of non-deductible contributions as a percentage of your non-Roth IRA goes up, possibly quite steeply. Since you do not have to pay tax on the non-deductible portion when you do a Roth conversion, the conversion becomes very easy from a tax standpoint. Specifically, the conversion amount consists mostly of non-deductible contributions, so you do not have to pay a lot of tax.


 * According to Natalie Choate's authoritative Life and Death Planning for Retirement Benefit,6th Edition, pp. 115-116. ISBN 0-9649440-7-3:


 * ''"..the proportionate allocation rule does not apply to rollovers from an IRA to a QRP (Qualified Retirement Plan] or 403(b) plan. Instead, a distribution that is rolled from and IRA to a QRP or 403(b) plan is deemed to come entirely out of the taxable portion of the IRA. This exception is necessary because the nontaxable portion of an IRA cannot be rolled into a QRP or 403(b) plan.


 * Example: Mr Gibbs has a non-traditional IRA that has a value of $30,000 and a $12,000 basis of after tax contributions. He also has a traditional IRA valued at $210,000 consisting of a rollover from a QRP plus some deductible IRA contributions. If he withdraws the $30,000 from his non-traditional IRA he must prorate the basis across his aggregate IRA balances. Thus, $12,000/$240,000 x $30,000 = $1,500. Thus $28,500 of the withdrawal would be taxable and the basis in the non-traditional IRA would now be $10,500.


 * Alternately, if Mr. Gibbs participates in a QRP that accepts rollovers, Mr.Gibbs could rollover, from his two IRAs to the QRP, every dollar above his $12,000 basis. He is left with one IRA containing $12,000 of after tax money. He can either withdraw the $12,000 tax free, or convert it to a Roth IRA.'' --Blbarnitz 16:23, 20 July 2009 (UTC)

Reader feedback: What happens to the basis in...
68.239.85.66 posted this comment on 10 March 2014 (view all feedback).

"What happens to the basis in an IRA as reported on Form 8606 at the death of the taxpayer? Is this transferred to the beneficiary and if so, how is it reported?"

Any thoughts?

Blbarnitz 11:24, 10 March 2014 (CDT)


 * From the IRS pub 950:"IRA with basis. If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible contributions, that basis remains with the IRA. Unless you are the decedent's spouse and choose to treat the IRA as your own, you cannot combine this basis with any basis you have in your own traditional IRA(s) or any basis in traditional IRA(s) you inherited from other decedents. If you take distributions from both an inherited IRA and your IRA, and each has basis, you must complete separate Forms 8606 to determine the taxable and nontaxable portions of those distributions."


 * The main sticking point is likely to be the beneficiary having access to the original owner's past filings of the Form 8606 so that the basis can be verified. --Blbarnitz 11:09, 26 November 2014 (CST)

Reader feedback: What are the contribution li...
96.2.247.250 posted this comment on 29 March 2014 (view all feedback).

"What are the contribution limits to a non-deductible ira?"

Any thoughts?

Blbarnitz 12:31, 29 March 2014 (CDT)

I added an explanation that the contribution limit is defined in IRS Pub 590. --LadyGeek 15:13, 29 March 2014 (CDT)

Reader feedback: Not a criticism - this is a...
71.236.72.22 posted this comment on 27 July 2014 (view all feedback).

"Not a criticism - this is a great page, but a suggestion for an enhancement. Rather than have the static table that you currently have, permit the user to put in their own parameters into a Java program, eg. 28% before retirement, 25% after, etc. and create the table dynamically."

Any thoughts?

This is an idea, but it should probably be an independent calculator linked on Tools and calculators, not included on the page here. Grabiner 19:55, 27 July 2014 (CDT)

Reader feedback: Looking for distribution rul...
72.69.82.158 posted this comment on 24 January 2015 (view all feedback).

"Looking for distribution rules - calculation of taxes"

Any thoughts?

Blbarnitz 12:23, 24 January 2015 (CST)

Is something missing from the page? Distributions are discussed under What is a difference between a Roth IRA and a non-deductible traditional IRA? (it's taxed as ordinary income). Actual tax calculations depend on the reader's situation, which should be discussed in the forum. --LadyGeek 12:30, 24 January 2015 (CST)

Reader feedback: Provide information about Re...
99.165.237.87 posted this comment on 20 November 2015 (view all feedback).

"Provide information about Required Minimum Distribution (i.e., is it required?) from a non-deductible IRA."

I would think that non-deductible contributions do not affect Required Minimum Distributions. Non-deductible contributions affect the cost basis (Form 8606), which subsequently determine the amount of taxes paid from an RMD.

Is this thinking correct?

LadyGeek 20:21, 20 November 2015 (UTC)


 * Pertinent IRS guidance: Publication 590-B (2014), Distributions from Individual Retirement Arrangements (IRAs), Distributions Fully or Partly Taxable


 * (previous comment added 16:20, 20 November 2015‎ Blbarnitz) I have updated the page. --LadyGeek 01:33, 21 November 2015 (UTC) ✅