The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Conversion to Roth IRA of non-deductible con Date:  12/1/1998  7:36 PM
Author:  TMFTaxes Number:  6642 of 130189

[[I have a regular IRA in which I have made $12000 worth
of non-deductible contributions.

If I open a Roth IRA and do a partial rollover of my
regular IRA into it in the amount of my non-deductible
contributions ($12000), I would expect that I don't
have to pay any taxes on the conversion, since taxes
have already been paid on that amount.
Is that true? Can anybody confirm?]]

Nope. That is NOT how it works at all. IRS considers your current IRA as one big homogenious IRA. And any distributions from the IRA (such as to make a Roth conversion) must be done on a pro-rata share.

For example, say your IRA was worth $50k, and you have $10k of non-deductible contributions. This means that 20% of your IRA would be "basis". If you made a $10k conversion to a Roth IRA, only 20% (or $2k) of that amount would be considered your "basis", and the remaining $8k would be taxable.

See how it works?? If you would like to read more about these computations, you can do so at IRS Publication 590 at the IRS web site.

TMF Taxes

Want to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link ( to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on to go directly there.

Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us