Nondeductible contribution

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Nondeductible contribution

A contribution to either a traditional IRA or Roth IRA. Income tax is due on the contribution in the tax year for which the contribution is made.

Nondeductible Contribution

A contribution to a retirement plan where the amount is taxable. For example, if one makes $2,000 in nondeductible contributions, one must still pay taxes on that $2,000 even though it was placed in a retirement plan. Nonqualifying plans usually have nondeductible contributions. Likewise, a Roth IRA takes nondeductible contributions, but this is because withdrawals following retirement are tax free.
References in periodicals archive ?
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.
Nondeductible contributions 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.
Nondeductible contributions can also be made to a traditional IRA.