Message Font: Serif | Sans-Serif
No. of Recommendations: 0
smdesai said:

I have two IRAs; one has all nondeductible contributions, value (9K) of which is right now lower
than the amount contributed (12K) and other has my 401K money (165K) rolled over from
previous job. My question is : When I convert nondeductible IRA to Roth will I have to pay any
taxes ? If so, can you suggest some reading material which shows how to go about calculating
those taxes. What effect the amount in rollover IRA will have on taxes ?

Uncle Clinton considers all of your IRA's as one. To him, you have an IRA with $174k with a basis of $12k. That gives you a basis (nondeductible contributions) of 6.8966%. However much you convert to a ROTH, from whichever IRA, you will be taxed on 93.1034% of the conversion, and 6.8966% of the conversion will be deemed already taxed. It doesn't matter which IRA you convert.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.