This is contrary to the general rule that distributions from a traditional IRA with both deductible and nondeductible contributions
are deemed made on a pro-rata basis.
However, all eligible workers and spouses can make nondeductible contributions
to a traditional IRA, regardless of income.
Withdrawals from individual retirement accounts are taxable in full unless the owner has made nondeductible contributions
IRA contribution records—keep a copy of all nondeductible contributions
to your IRA permanently to show that you have already paid tax on the money.
The first is a Coverdell Education Savings Account, which allows the taxpayer to make $2,000 annual nondeductible contributions
to the plan.
will not be excluded from gross income as investment in the contract where the taxpayer is unable to document the nontaxable basis through the filing of Form 8606, Nondeductible IRAs (Contributions, Distributions and Basis) for the year in which such nondeductible contributions
were made and the year in which they were distributed.
401(k) plan) for his or her own benefit, and the amount rolled over equals only the sum of deductible contributions and earnings on all contributions (whether earned on deductible or nondeductible portions) but not any nondeductible contributions
, the entire amount roiled over will not be taxed at the time of rollover.
A taxpayer has basis in an IRA to the extent of nondeductible contributions
made to the IRA, minus any withdrawals and distributions of previously taxed contributions.
For example, if a taxpayer has an IRA with a value of $100,000 and has made $10,000 of nondeductible contributions
to the IRA, 90% of each distribution will be taxable and 10% will represent a tax-free return of the taxpayer's basis in the IRA.
Does not include nondeductible contributions
made from January 1 to April 15 for the prior year.
So if you've maxed out your 401(k) or 403(b) contributions and don't qualify to make Roth IRA contributions because of your income level, you still can make nondeductible contributions
to a traditional IRA in 2009 and 2010 and then convert it to a Roth IRA in 2010.
can also be made to a traditional IRA.